Brian Campbell; Corporate Vice President, Investor Relations; John Wiley & Sons Inc
Matthew Kissner; President and Chief Executive Officer; John Wiley & Sons Inc
Christopher Caridi; Interim Chief Financial Officer; John Wiley & Sons Inc
Jay Flynn Flynn; Executive Vice President, General Manager, Research and Learning; John Wiley & Sons Inc
Daniel Moore; Analyst; CJS Securities
Sami Kassab; Analyst; BNP Paribas
Operator
Good morning, and welcome to Wiley's Q3 fiscal 2025 earnings call. As a reminder, this conference is being recorded. At this time, I'd like to introduce Wiley's Vice President of Investor Relations, Brian Campbell. Please go ahead.
Brian Campbell
Thank you, and thank you all for joining us. On the call with me are Matt Kissner, Wiley's President and CEO; Christopher Caridi, Interim CFO; and Jay Flynn, Executive Vice President and General Manager of Research and Learning.
Note that our comments and responses reflect management's 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.
Unless otherwise noted, we will refer to non-GAAP metrics on the call, and variances are on a year-over-year basis and will exclude divested assets and the impact of currency. Additional information is included in our filings with the SEC. A copy of this presentation and transcript will be available on our Investor Relations web page at investors.wiley.com.
I'll now turn the call over to Matt Kissner.
Matthew Kissner
Thank you, Brian, and good morning, everyone. Thank you for joining our third quarter update. We continue to capitalize on the increasing demand for scientific research and responsible AI development. We are executing well on our objectives of driving recovery in growth in research and material margin expansion overall. And we remain on track to achieving our outlook for this year and next. In fact, we are raising our fiscal 2016 margin target.
For those who may be new to the story, Wiley delivers authoritive content and data-driven insights to institutions, corporations, researchers and learners. Our extensive catalog includes some of the most valuable and important content in the world, essential in the advancement of science, technology and medicine. In the responsible development of AI and other machine learning applications and in future high-value use cases supporting research and development such as science analytics and information services.
Let me acknowledge the economic uncertainty out there, ranging from consumer confidence and inflation to tariffs, policy swings and geopolitical unrest. As a reminder, for over 200 years, Wiley has been a safe haven through many economic cycles and periods of disruption. We demonstrated this resiliency during the great Recession and the COVID pandemic. While publishing services, content and brands remain must-have resources and our markets continue to prosper.
Supporting this is our strong balance sheet and consistent cash generation over time as evidenced by 31 consecutive years of dividend increases. What makes Wiley unique and compelling over the long term? As noted, our markets are robust, and demand remains consistent, directly correlated with increasing global R&D investment. We're recognized as a wide mode business with essential authoritive content and trusted brands. We deliver resilient compounding growth in markets that remain stable even during economic downturns.
Approximately half of our revenue is recurring. In our Research segment, this number is nearly 75%. We are in early AI beneficiary with emerging long-term opportunities in the corporate sector, particularly in research and development. Our financial characteristics are strong with healthy margins and cash generation, low leverage and ample liquidity.
And finally, the leadership team at Wiley is aligned and committed to continuous improvement and value creation. Let's talk about some of the favorable underlying trends we're seeing. First, Global R&D spend continues as the primary driver of research output, remaining strong in 2024 with growth of 8%. Growth projections for 2025 are similar.
Second, the demand to publish continues to increase, reflecting its vital importance to the careers of researchers. Year-to-date, research article submissions are up 18% and with publishing output up 8%. Third, our recurring revenue models demonstrate strong health with solid pricing power supported by consistently higher volume. Recurring revenue models include our subscription read-only and transformational read and publish agreements.
Fourth, quality and scale matter and Wiley excels in both areas. Quality has become more important than ever for researchers as they seek to publish entrusted high-impact journals. At the same time, scale has become more important given the increasing complexity of this mixed model ecosystem with customers ranging from individual researchers to national governments. Our top-tier quality and scale give us an opportunity to outpace the market over time.
Finally, Wiley's strategic position in AI development and application offers multiple advantages. As previously discussed, our content serves as a foundation for training large language models and bringing to market vertical-specific LLMs. Additionally, as a publisher, the nature of our work enables us to greatly benefit from AI productivity tools.
Let me shift gears and focus on our headlines for the quarter. Revenue growth was driven by mid-single-digit growth in research including an expanded AI licensing project with an existing technology customer. Learning was down due to challenging comparisons to prior year as discussed in our last earnings call and some softness in academic books. Chris will go into further detail on our segment performance.
Key takeaways from the quarter include: our calendar '25 Journal Subscription and TA renewal season is nearly 80% complete, and we are seeing encouraging growth trends. Open Access continues to demonstrate rapid growth across our general portfolio.
We expanded a corporate AI licensing agreement this quarter and continue to build a pipeline of vertical-specific opportunities. It's very early days in the development of this vertical-specific market, but we're seeing considerable interest from leading research intensive corporations.
Margin expansion remains a multiyear strategic focus and I'm pleased to report 280 basis points of operating margin improvement and 50 basis points of adjusted EBITDA margin improvement over prior year. As we will discuss later, we see significant opportunities for continued margin improvement. Chris will talk to our fiscal '25 outlook and fiscal '26 targets, but we see our EBITDA margin and EPS trending towards the high end of guidance, and we're raising next year's margin target.
On to our results. Throughout my commentary, I'll exclude divested assets and currency impacts. Revenue was up 1%, driven by research growth of 5%, offsetting an expected 6% decline in learning. This year-over-year swing stemmed from a $6 million licensing renewal in the prior year and softness this quarter in academic books.
Adjusted EPS increased 39% due to higher adjusted operating income and a lower adjusted effective tax rate. Our operating margin rose 280 basis points to 14.2%. Adjusted EBITDA grew 4%, reflecting revenue growth partially offset by investments in growth and productivity initiatives.
Our adjusted EBITDA margin for the quarter was 23.2%, up from 22.7%. Let's talk about how we're executing on our core objectives this year. First, driving recovery in growth in research Year-to-date, this segment is up 3% with growth across all key areas, including our recurring revenue models, open access publishing program, licensing and solutions.
Leading indicators continue to be favorable. The expansion of our advanced Journal franchise has been a great success story. This portfolio encompasses over 20 high-impact journal titles, of course, disciplines, and we continue to expand in critical areas such as life sciences, AI and machine learning.
Our multidisciplinary Journal Advanced Science is delivering exceptional growth this year, while our newest titles advanced intelligent discovery and advanced robotics research recently published their inaugural autos. We anticipate launching additional advanced journals in 2025 and 2026. And as a reminder, top-tier general franchises like advanced are differentiators for large publishers.
Second, moving decisively on AI opportunities. Year-to-date, we've generated $30 million in licensing revenue relating to trading models and executed an early but important agreement for vertical-specific models.
This market is evolving and our pipeline remains very active. Third, driving continued margin improvement. Through nine months, our adjusted operating margin increased 330 basis points to 13.3%, and adjusted EBITDA has improved by 160 basis points to 22.3%.
Let me say a few words about the current US funding environment. We're keeping a close eye on the potential impact of US government actions on research funding. We don't anticipate any near-term impact on our research publishing programs, given the exception of volume in our article pipeline, the lead times associated with any potential impact and the recurring nature of our multiyear agreements.
Importantly, as I'll describe in a moment, US federal funding only supports a small percentage of our research output. All of this is evident in today's confident reaffirmation of our fiscal '25 outlook and fiscal '26 targets, including the margin improvement. Moreover, it's too early to weigh any potential long-term impact given the high level of uncertainty and the critical importance of scientific and technological activity in driving economic growth.
Peer-reviewed research is how these advancements are communicated, evaluated and applied. It is referred to as the global knowledge ecosystem. And Wiley stands at the center of it. Historically, this industry has advanced in good times and bad. It's always risen about politics. It's been excluded from tariffs and trade wars, and it's continued on even through conflict. It is an industry that is geographically well distributed and powered by many different funding sources.
Every region participates with remarkable balance as illustrated here. For context, China leads as the number 1 source of research output worldwide, followed by the US, the UK, Germany and Japan. Governments in these countries consider this positioning strategically important, contributing to Wiley's broad geographic diversification.
In terms of regional breakouts, Asia Pacific is responsible for around 45% of our article output, EMEA around 30%; North America, around 20% and other makes up about 5%. As for the US, direct federal funding is only responsible for a single-digit percentage of our total article output. Of course, we are fully confident that the US Scientific, Technical and Medical Research will continue to receive federal support given the essential role that research plays in US economic growth, global competitiveness and societal well-being.
Where are we today? Mature markets have returned to steady growth, supported by continued R&D investment and growth markets have seen some remarkable new developments. Consider India's innovative, One Nation One subscription initiative. We recently executed this multiyear agreement, expanding access to over 6,000 Indian institutions and supporting 18 million researchers and students.
While this expansion increases profitable revenue for us in India. Its significant extends beyond financial metrics. The agreement unifies the research ecosystem of the world's second most populated country and as our India country lead, Ritesh Kumar stated, it empowers Indian researchers to lead global scientific conversations and accelerate the country's research output. Our presence in India positions us well as these initiatives drives progress and growth in Indian research.
Similarly, in Brazil, we secured a new multiyear transformational agreement that expands access to over 430 research, academic institutions reaching upwards of 6 million researchers. Both these landmark agreements serve strategic purposes that transcend immediate financial benefits. They expand access in emerging growth markets and deliver additional revenue streams and ultimately, enlarge both the scientific community and the global supply of quality research.
Let's examine R&D and publication funding, which shows similar geographic diversification. Our institutional models draw support from a diverse range of funding sources, including national governments, such as our single licenses in Germany and India, national funding bodies and agencies, state governments, private endowments, foundations, tuition revenue and corporations.
I'll emphasize again that nearly 75% of our research publishing revenue is recurring. Also, while many associate US R&D with federal government funding, corporations fund 80% of total US R&D investment. This reality reveals one of our most promising long-term opportunities.
Currently, corporations represent a relatively small percentage of our overall revenue. However, we believe there is significant sustained value in integrating our content and data more deeply into the corporate research process, such as AI model enablement and providing data and analytics to support the research process.
Taken together, all these factors position research as both resilient and poised for continued expansion. To summarize, we continue to see growth this year in our recurring models and Open Access program. Renewals and leading indicators are favorable and give us strong visibility. Over the long term, our quality and scale will remain essential elements for attracting and retaining research authors and driving market share gains.
Let's now turn to AI growth, particularly the long-term corporate opportunity I mentioned earlier. This quarter, we executed an expanded agreement for AI model training purposes and we're seeing promising developments in the broader vertical-specific market.
The agreement builds on the project announced in Q1, involving backlisted learning content for training large language models. This Q3 expansion incorporates backlist research content defined as previously published material older than three years.
The $9 million agreement brings our total AI revenue this year to $30 million, following $23 million realized last year. As a reminder, these Phase 1 trading agreements are non-recurring. It's important to reemphasize that licensing represents a core business activity for Wiley.
As we take on new AI-specific initiatives, our guiding principles remain straightforward. We recognize our responsibility to engage with AI developers to secure scientific accuracy and deliver optimal learning outcomes. These models require training untrusted authoritive content such as Wiley's while protecting the rights of authors and other copyright holders, a fundamental responsibility we embrace as a knowledge company.
Beyond these large-scale training agreements, we're seeing encouraging demand from multinational R&D-centric companies across critical sectors, including health care, biopharmaceuticals and industrial chemistry. Distinct from our LLM training agreements, these R&D intensive corporations are using AI-powered content and tools to speed up product development, identify breakthroughs and reduce internal cycle times.
And although the individual opportunities are materially smaller in size, they represent a much larger addressable market, and the revenue is highly likely to be recurring. Enhanced support for corporate research initiatives represents Phase 2 of our content licensing strategy with a broad set of applications across the many disciplines we support.
These types of collaborations would extend beyond generating new licensing revenue streams to function as strategic partnerships, enabling mutual learning about AI application development and its impact on improving research outcomes. The market will take time to fully develop, but we are encouraged by the early demand we're seeing.
I'll now pass the call to Chris to take you through our year-to-date results, segment performance, outlook and financial position.
Christopher Caridi
Thank you, Matt, and good morning, everyone. Our results continue to align with expectations, reinforcing our confidence in achieving our fiscal 2025 outlook and fiscal 2026 targets, which I'll speak to shortly. Turning to our year-to-date results. Adjusted revenue grew 3%, driven by core growth in research and AI licensing. Excluding onetime AI-related revenue, overall revenue grew 1%, with research increasing 2%.
We continue to advance our margin expansion initiatives, resulting in significant improvements. Adjusted operating income up 38%, EPS up 43% and EBITDA up 12%. Our adjusted operating margin improved by 330 basis points to 13.3%, and our adjusted EBITDA margin rose 160 basis points to 22.3%. We continue to focus on optimizing our cost structure, more specifically, rightsizing our technology costs and other corporate expenses.
At the same time, we're transforming how we publish and work to drive greater operating efficiency. We do anticipate restructuring charges from this activity. Meanwhile, free cash flow shows strong recovery, and we remain on track to achieve $125 million in fiscal 2025.
Turning to our Research segment. Third quarter and year-to-date revenue increased 5% and 3%, respectively. Q3 growth stemmed primarily from AI licensing, in our Open Access programs. For the nine month period, research publishing growth reflected strong demand to publish and read with double-digit growth and gold open access and low single-digit growth in our recurring revenue models, offsetting softness in ancillary products.
A reminder that ancillary products include print and other non-recurring items such as backfiles, particle pay-per-view, digital archives and title by title journal sales to libraries. Onetime AI licensing projects for backlisted content worth approximately $10 million year-to-date, also contributed to our year-to-date results. Excluding these AI projects, research revenue is up 2% year-to-date.
As Matt mentioned, we have completed nearly 80% of our calendar 2025 renewal season and see steady growth trends. The multiyear nature of these agreements means that around 1/3 of our library customers and consortia come up for renewal annually. We have successfully renewed major agreements in the UK, France and the US while executing those new landmark deals in India and Brazil.
This renewal season extends from early December through the end of April 2025. Research Solutions has successfully returned to growth, with revenue increasing 6% in the quarter and 3% year-to-date, driven by expanded content solutions and databases for societies, corporations and other publishers.
Wiley's key differentiator continues to be our enduring success and partnering with societies and other professional organizations. Four of our key society health science partners have been with us for over 50 years. while 45% have been with us for more than 20. This remarkable retention rate demonstrates not only our shared success, but also highlights one of our most valuable assets, our reputation.
Partnerships like these are becoming increasingly multidimensional with Wiley delivering their comprehensive suite of services from publishing and content platforms to marketing and recruitment. Our IEEE partnership exemplifies this approach. As one of the world's largest societies responsible for 1/3 of all technical literature in electrical engineering and computing, IEEE now benefits from Wiley's expanded role in managing their advertising sales and programs.
This arrangement provides access to highly engaged audiences through impactful advertising, in digital content solutions. For Wiley, this partnership extends our participation in the engineering vertical, leveraging our unique access to one of the world's most valuable professional audiences. Adjusted EBITDA for research increased 12% for the quarter and 5% year-to-date, reflecting revenue growth and cost savings, partially offset by investments in growth and productivity.
Our Q3 margin improved by 180 basis points to 32.7%, while our year-to-date margin improved by 30 basis points to 31.1%. In summary, we are encouraged by our Q3 and year-to-date performance in research and continue to anticipate a strong finish to the year.
Let me now address our Learning segment. In addition to challenging year-over-year comparisons, we saw moderate softness in academic book sales. While Q3 revenue decreased 6%. Year-to-date, revenue rose 4%, driven by expansion in professional content and AI licensing revenue. We continue to experience robust growth in signing new book titles across the science, technology, medicine and professional fields. Additionally, our Xi book stem Courseware remains a strong growth driver.
Adjusted EBITDA for the Learning segment decreased 5% this quarter, reflecting revenue performance. Nevertheless, our margin expansion initiatives delivered 30 basis points of improvement, resulting in an adjusted EBITDA margin of 35.4%. Year-to-date, our margin for learning improved by over 400 basis points. to 35.3%.
In summary, the year-over-year softness in Q3 aligned with our expectations. We continue to secure new business in our core areas, enhance margins. and engage in productive licensing discussions with AI developers.
Turning to corporate unallocated expenses. These decreased 5% this quarter primarily due to lower depreciation and amortization. Excluding D&A, expenses increased 9%, reflecting the timing of investments in enterprise modernization and consulting fees related to strategic initiatives, including reengineering our cost structure.
Notably, our segment margins improved both this quarter and year-to-date, partly resulting from our reduced corporate allocated expenses. This demonstrates our continued progress in rightsizing our shared service costs, and we have additional improvements planned.
Let me now turn to our growth outlook. Our year-to-date execution, performance and indicators remain solid, enabling us to reaffirm our outlook in the mid- to high end of our projected ranges. As previously noted, we anticipate a strong Q4 for our Research segment, driven by favorable journal renewals and demand to publish indicators as well as accelerating growth in Research Solutions and favorable comparisons to prior year.
These positive factors should more than offset the $23 million non-recurring AI deal recorded in Q4 of last year. Also, as mentioned earlier, we are reassessing our cost structure with additional expected savings expected in fiscal '26.
To summarize, we expect full year revenue to land near the midpoint of our $1.65 billion to $1.69 billion range, representing top line growth of approximately 3%. Our segment outlook aligns with expectations with research revenue growing by low to mid-single digits and learning by low single digits. Adjusted EBITDA is expected to land near the midpoint between $385 million to $410 million, translating to high single-digit growth. We anticipate our EBITDA margin to be at the high end of our 23% to 24% range.
Adjusted EPS is expected to be at the high end of our $3.25 to $3.60 range, delivering strong double-digit growth over last year's $2.78. Finally, free cash flow is expected to meet our guidance of approximately $125 million, an improvement from $114 million in the prior year. While capital expenditures will come in lighter than initially projected, restructuring costs will be higher due to expanded cost reduction initiatives.
Let's turn to the targets we first set down in January of 2024. Since that point, we've made decisive moves to improve our fundamentals and we'll continue to do so. Given our momentum in investments and research, our improved efficiency and additional cost savings, we are increasingly confident of our outlook for fiscal '26.
One, we continue to see revenue growth in the low to mid-single-digit range. Two, we are raising our margin target to be above 25% from the original 24% to 25% range. We will be more specific when we discuss our full year guidance in June. Three, we are reaffirming our free cash flow target of $200 million up from $114 million in fiscal '24 and $125 million projected for fiscal '25.
Let me walk you through the basic components of that improvement. As is illustrated here, we anticipate strong EBITDA growth next year given our revenue and margin outlook, lower restructuring costs and improved working capital.
Let me briefly conclude with our financial position and return to shareholders. Cash flow from operations and free cash flow year-to-date are much improved due to a mix of improved operating performance and working capital timing.
Free cash flow year-to-date has benefited from lower CapEx. Year-to-date, we continue to return cash to shareholders. with dividends and share repurchases totalling $93 million, up from $87 million in the prior year. Approximately $35 million was used to acquire 784,000 shares, our current dividend yield is over 3.5%.
Finally, our net debt-to-EBITDA ratio was 2.0 at the end of January compared to 1.9 in the prior year period. The more appropriate time to look at this number is when we report April year-end in June. Last year, we disclosed a leverage ratio of 1.7.
With that, I'll pass it back to Matt.
Matthew Kissner
Thank you, Chris. One final mention before I summarize our key takeaways. Yesterday, we announced that Dr. Karen Madden has joined the Wiley Board of Directors. Dr. Madden is the Senior Vice President and Chief Technology Officer at MilliporeSigma, the US and Canada Life Science business of Merck KGaA, where she is responsible for shaping the technology road map and R&D strategy. MilliporeSigma develops products focused on scientific discovery, bio manufacturing and testing services.
As noted, Wiley's long-term strategy is increasingly focused on the corporate R&D value chain, and Dr. Madden's wealth of knowledge and expertise in this area will be a tremendous addition. Okay. Let's review our key takeaways before we move on to questions.
In periods of economic uncertainty, Wiley has consistently served as a safe haven, delivering resilient compounding growth across economic cycles and displaying geographic diversification, significant competitive advantages and strong financials. We will continue to move forward with operational discipline, fiscal prudence and strategic foresight.
We are an early beneficiary in AI development evolving alongside our corporate partners. We continue to explore various content opportunities for training, inference and application with an encouraging pipeline. As emphasized, content licensing represents a core business activity for us, not merely an AI-specific initiative.
Our execution remains strong with excellent organizational alignment, yielding significant year-to-date improvements in both margins and cash flow. And we maintain full confidence in our outlook for Q4, fiscal '25 and fiscal '26 with margin upside and a reaffirmed free cash flow target of $200 million.
I want to thank all of you for your interest and time today. I also extend my sincere appreciation for our Wiley colleagues for their dedication and hard work in bringing us to this point and positioning us for even greater success in the future.
I'll open the floor for questions.
Operator
(Operator Instructions)
Daniel Moore, CJS Securities.
Daniel Moore
Thanks. Good morning, Matt. Good morning, Chris. Thanks for all the details and color. Great to see the progress in upward revision regarding the '26 margin target. Maybe just talk a little bit about the drivers? Is it additional cost savings, incremental confidence on revenue. AI expectations for incremental AI revenue, all of the above? Just what's driving the upward revision there?
Matthew Kissner
Thanks, Dan, and let me kick it off and then I'll turn it over to Chris, but it's really primarily driven by working on the cost structure. And it's really gratifying to see the ability to win confidence really talk about these improvements coming through in our guidance. But really across the organization, we've been hard at work at, let's say, rationalizing the structure and getting back to what we would consider competitive margin levels.
Let me turn it over to Chris, who can give you a little more insight into that.
Christopher Caridi
Yes. Thanks, Matt. Dan, the primary driver, as Matt said, is that we are rationalizing our cost structure largely in corporate shared services. We've been signaling that we were focused on this area. We see that we will begin execution on that in the latter part of this year, you'll see the benefit next year. It's 100-plus basis point improvement we expect as a result of the actions we're taking.
Matthew Kissner
Just real quick, we want to create sustainable value here in terms of what I would call permanent margin improvement. So make these actions we're taking really count. So really across the organization, we're looking at the structure, our footprint in certain places and -- and really looking at getting excited that not only '26, but even beyond to be showing really a continuous improvement mindset around margins.
Daniel Moore
I think you just took the next question out of my mouth. Thinking about the longer-term opportunity, what have you learned from competitors, Springer now that they're public, how do you compare and contrast your cost structure? And how do you think about the potential for more sustained margin upside going forward? .
Matthew Kissner
Yes. We did a lot of benchmarking, including, of course, our competitors at Springer Nature. And it did point us to looking at structural cost differences. Now you do know that their mix of business is quite different from us. So they do -- we do have more of a society business in our mix than they do.
So that is the royalty costs associated with it. But even when you back out the royalty cost, it points to us in the direction that we do have an opportunity to streamline our cost structure. So I think -- and we've talked about this both with the executive team and the broader team here, and we are all looking at margin improvement as kind of a way of life. I think there is a lot of room for improvement there, but we want to do it in the right way, in a responsible way and not interfere with the work we're doing on driving revenue growth.
Daniel Moore
Understood. Very helpful. Switching gears, the $9 million incremental AI revenue, just to confirm that the full $9 million fell in Q3 and that was in research as opposed to the prior agreements, which fell into learning, correct? .
Matthew Kissner
That's correct.
Daniel Moore
And the -- that's perfect. Switching gears again in terms of learning. Obviously, you had a tough comp this quarter. Just talk about the outlook over the next, say, 12 months plus both academic and professional sides of the business and your confidence in getting back to positive growth in fiscal '26 given some of the tougher comps you'll be up against particularly in the first half of the year.
Matthew Kissner
Well, Jay is on the call, so let him talk a little bit on kind of how he's looking at the business outlook, and then Chris can give you a sense of the numbers.
Jay Flynn Flynn
Thanks, Matt and Dan, nice to hear from you again. So we did indeed have a tough comp. I think if you exclude the AI revenue, though, from the last quarter, we were -- we were only off about 1 point in terms of prior year.
And that points to -- some timing in the business, a little bit of pressure in the retail channel and a specific assumption around enrollments in the fall and spring semesters that just proved a little ambitious, in terms of where we wanted to be this year.
But overall, I think the things I'd point to that give us some optimism and really underpin the essence of what Matt was talking about what we're doing, I'd point to improve margin in learning in the quarter as a key driver of that overall margin mix improvement that we're looking at growth in our zyBooks business underlying courseware.
And a real long-term opportunity and continued digital licensing and AI in that business that we're looking to capitalize on. So just to reiterate, we think that improved cost discipline efficiency measures, supporting higher margins remain a key feature in the business and that we've got a nice mix of products there that is in the -- in both the short and medium term, going to continue to do its job for us in the P&L and help support our overall guidance.
Matthew Kissner
Chris, do you want to add anything?
Christopher Caridi
Yes, if I could. I don't want to specifically get into projections into '26, but I'll just say relative to this Q4. We do have a tough comp coming up. Obviously, last year, we had a large Gen AI deal. If we remove out that deal, we would actually be talking about a very positive learning growth in Q4.
Instead, we only see it coming down in the low to mid-single digits in Q4. And a lot of that is strength, as Jay alluded to in courseware, it's a big quarter for courseware and it will have an impact there. And also, there are other licensing deals that we anticipate will mitigate the -- to some degree, the large deal that we had in the prior year.
Matthew Kissner
Does that answer your question, Dan?
Daniel Moore
It does. That's helpful. And you alluded to the strength in some of the book signings, the author signings, et cetera. So it should bode well for fiscal '26. Maybe one more. Obviously, you bought back, I think, $35 million in the quarter. You're looking at given the guidance somewhere in the -- over the next, call it, five quarters, you'll generate $335 million loss of revenue of free cash flow, and that's obviously pre-dividend, but still significant opportunity and leverage keeps going lower.
So just talk about capital allocation near term, stock's trading sub 10 times earnings, how are you thinking about buybacks versus paying down debt and any other uses of your cash flow. Thanks again for all the color.
Matthew Kissner
Sure. Yes. In the current year, we've been buying back at a larger -- excuse me, a higher rate than we had in the prior year. It's modest to some degree, but so is our cash flow improvement year-over-year. As we expand into the next year, we'll be taking a hard look at the pace of our share repurchases. There's no commitment at this point, but obviously, we'll have more free cash flow to make that assessment.
Anything else there?
Operator
(Operator Instructions)
Sami Kassab, BNP Paribas.
Sami Kassab
Thank you. Yes. So you described how the US already accounted for 20% of your article count. Can you a little bit elaborate on your revenue exposure to US institutions and in particular, to US medical libraries, given all the talks around NIA trending.
The second question may -- could you give a few examples of how deploying AI internally helps improve cost efficiency? And can you discuss whether thanks to AI and the issue tools productivity gains can help improve margins? Are we talking about AI driving 10 bps? So are we talking about AI and automation driving 100 bps or more?
Matthew Kissner
I don't think we're going to get to -- I'm sorry, Sami, go ahead.
Sami Kassab
And lastly, when I look at Elsevier or Springer or (inaudible), their research business is growing 4% to 5% organically. Do you think that research can accelerate towards 4%, 5% in the short to medium term? Or are there structural differences in exposure that perhaps may prevent that in the medium term? Thank you very much.
Matthew Kissner
Yes. Let me try to answer all of that. And I'm going to ask Jay to step in at the right time. On the last question, you may have heard us on the prior call talk about the fact that we have a lot of our research revenue back ended this year. into the fourth quarter. You'll see that when we finish the year, we'll be -- research growth rates will be much more at industry levels. So that's the last question.
On the percentage -- as you might imagine, we are monitoring the developments in the US very carefully. And when we look at the impact of some of the -- the potential impact of some of the US funding actions, it really trades us back to a low single-digit impact on us and there are also -- as you all know, many of these arrangements we have are in multiyear agreements, and there are time lags associated with the impact.
And the fact is right now, there are so many unknowns with how this is going to fall out in terms of policy changes and court challenges. So we're very confident about the business, given its geographical diversification, I'll add on to that. So we're confident and confident enough to reaffirm our guidance.
So -- but we all monitor it and take it very seriously. On the middle question about the AI impact on kind of how we run the business. Jay and his team have some very, very exciting things underway. And we don't we don't translate it into a particular financial impact at this point, but it's part of what's driving the overall margin improvement in the company that we're committing to with our increased margin guidance. But Jay, maybe touch on a couple of interesting areas where you're finding good success with AI.
Jay Flynn Flynn
Yes. Sure, Matt. And Sami, thanks for the question, and thanks for the interest, of course. Let me just -- before I jump into AI, you asked about US medical library exposure. I just want to reiterate one of the two things that Matt said, we in the prepared remarks, talked about how 84% of our content comes from outside the United States and that distribution of articles, only it's a single-digit number that's tied directly to federal funding. And of course, we anticipate a strong year, as Chris talked about, as we put in our guidance, specifically with medical libraries, if I recall correctly, there's about 120 academic medical centers in the United States.
We have thousands of customers globally. And so while, of course, we're monitoring what happens at those academic medical centers and those medical libraries, we feel good about, A, the relationships long term that we have with those customers; and B, we feel good about the global nature of the business.
So on that, let me just give it to the question a bit more. And as Matt pointed out, we are really -- we feel like we are driving and embracing AI, both in the innovation side of the business and on the cost savings side. And you asked particularly about opportunities in cost, certainly, workflow automation, document review, research integrity, automation of content workflows in particular, are areas where we're spending a lot of time.
We've got a group set up internally called the Magic lab that we quite at this kind of work, and they're working every day with folks inside the building and outside the building. We're bringing in experts to help us on this journey.
But we feel really -- we feel very optimistic that two things. One, humans are going to stay at the center of the AI work in our sector because of the importance of human and expert overview and review of the processes.
And second, we feel like -- this is an area where we want to lead and we want to continue to invest. And so as a -- maybe as the key takeaway, Sami, I think, our approach is ensuring that AI innovation is going to happen with integrity, and we're going to balance technology process with EFCO stewardship, author engagement and -- and just a laser-like focus on both the top and the bottom line.
Sami Kassab
Thank you very much. Very helpful. Thank you.
Matthew Kissner
Thank you, Sami.
Operator
(Operator Instructions)
Matthew Kissner
If there are no other questions, operator, I can wrap up.
Operator
I will turn the call back over to Mr. Kissner for closing remarks.
Matthew Kissner
Thank you. Well, thank you, everyone. We appreciate you spending time with us. We appreciate your confidence. Again, I want to thank the Wiley colleagues around the world who have helped drive this terrific progress we're seeing, and we look forward to catching up with all of you again in June when we talk about the close of the fiscal year. Have a great day.
Operator
Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
