Sales at Wiley fell 5% in the third quarter ended January 31, 2023, to $491.4 million, from the comparable period in fiscal 2022, and the company had an operating loss of $67 million, compared to operating income of $46 million a year ago. The loss in the most recent quarter includes a one-time charge of about $100 million primarily due to non-cash goodwill impairment in Wiley’s education services/university services operations, as well as restructuring charges. The write-down includes $9 million for closing a technology center in Russia. Following the release of the results, Wiley's stock price fell 7% on a day the Dow Jones Industrial Average dropped about 2%.
Sales were down in two of Wiley’s three operating groups. The company reorganized its education business lines into its academic segment, which focuses on university customers and includes academic publishing and university services, and its talent segment, which will be focused on delivering training, sourcing, and upskilling solutions to corporate customers. The new segments replace its academic and professional learning and education services segments. The research segment, Wiley’s largest, remains intact.
In the quarter, sales in the academic group fell 11%, due to declining sales of print texts and e-books, which offset growth in digital courseware. Sales also fell in the university services business due in part to enrollment declines in colleges and universities.
Sales in the research group fell 4%, primarily due to what Wiley called “a pause in the Hindawi special issues publishing program.” The program, which creates special open access materials, “was suspended temporarily due to the presence in certain special issues of compromised articles,” Wiley said, leading to a revenue decline of $9 million at Hindawi. Revenue rose 2.4% in other open access publishing programs.
Revenue in the talent group rose 13%, with double-digit growth in placements and corporate training driving the performance.
Wiley CEO Brian Napack said the third quarter results were “clearly below our expectations,” telling analysts in a conference call that "there's no sugar-coating it: Q3 was a disappointing quarter in a challenging and unpredictable year." In detailing the decline in academic publishing, Napack explained that the pullback in discretionary consumer spending had a significant negative impact on its professional publishing program, and also affected academic content and courseware sales. The academic segment was also hurt by "key online retailers adjusting their inventory practices, abruptly lowering their inventory levels at different times during the year," Napack said.
The "pause" at Hindawi could cost Wiley $30 million in revenue for the full year, Napack said. He told analysts that Wiley suspended the program after it fired some freelance editors who had been involved in "misconduct in certain special issues" where "compromised papers were being submitted and accepted." To prevent the reoccurrence of the problem, Wiley has increased editorial controls, and introduced "new AI-based screening tools into the editorial process."
As a result of the poor quarter, Napack said Wiley is “accelerating and expanding” its work to become more focused around its core business areas and pointed to the recent sale of its test prep business as an example of moving out of an area that didn't fit with Wiley's future. Previous streamlining actions are on track to save Wiley $60 million, and CFO Christina Van Tassell said more cost saving measures are in the works that will involve layoffs, reductions in real estates costs, and "other measures."
The disappointing quarter also led Wiley to lower its forecast for the fiscal year ending April 30. Sales are now forecast to be between $2.06 billion and $2.09 billion, down from previous predictions of between $2.11 billion and $2.15 billion. Sales in fiscal 2022 were $2.08 billion. Earnings are also expected to be below last year’s $433 million.