Q3 2021 John Wiley & Sons Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to Wiley third quarter 2021 earnings call at.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
I'll ask a question. During this time you will need to press Star and then number one on your telephone keypad.
If you require any further assistance. Please press star zero I would now like to turn the call over to buy at least Vice President of Investor Relations. Brian Campbell. Please go ahead.
Thank you Hello, everyone welcome to Wiley third quarter 2021 earnings update.
With me are Brian APAC, President and Chief Executive Officer, and John Gritzmacher, Chief Financial Officer.
Brian and John will make some formal comments and then we'll open it up for questions.
Your reminders to start.
All are being recorded and May include forward looking statements you shouldn't rely on these statements as actual results may differ materially and are subject to factors discussed in our SEC filings.
The company does not undertake any obligations to update or revise forward looking statements to reflect subsequent events or circumstances.
So let me provide non-GAAP measures as a supplement to evaluate underlying operating profitability and performance trends.
These measures do not have standardized meanings prescribed by U S. 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 from variances are on a year over year basis and will exclude the impact of currency.
After the call a copy of this presentation and a playback on the webcast will be available on our Investor Relations Web page.
I'll now turn the call over to why these president and CEO Brian.
Good morning, everyone. Thanks for joining us today.
While they continued to deliver strong results in the third quarter based on the consistent execution of our customer centric strategies in research and education.
More than a year into the pandemic. It is clear that Wiley is very well positioned to help our core customers researchers and learners achieve their goal in a very different and sometimes very challenging world.
Learn as we settled into online and hybrid education like never before.
Wiley has what they need to succeed on their personal career journeys.
Researchers are conducting their work and increasingly virtual and open ways and Wiley has what they need to get their discoveries out to the world as quickly as possible, where they can drive understanding and innovation.
Without doubt the Covid pandemic has demonstrated yet again, the enduring strength of the research and education markets.
The demand for high quality peer reviewed research continues to grow.
The need has never been more urgent for affordable education that connects people directly to good jobs.
While he is committed to making the overall knowledge ecosystem more productive.
All in all that we do our goal is to increase the speed volume and impact of research and education.
By succeeding at this we will achieve our company's mission, which is to unlock human potential.
Today Wiley is a digital company that draws 83% of its revenue from digital products and services, which grew at 7% in total over the past 12 months.
Overall, 55% of why these revenue today is recurring.
Our digital research content and platforms generate billions of user sessions, each year and our digital courseware online degree programs support greater affordability and impact in education, and thus rapidly increasing unit volumes.
On revenue growth, our digital revenue streams delivered strong profitability based on attractive sustainable business models.
In the past year, we've seen an acceleration of three long standing trend that define our market the move toward open research in a more productive research ecosystem.
Gration to online and hybrid education, and University and corporate settings, and the increased adoption of digital tools and courseware needed to power online and hybrid education.
Our strategies are organized around these trends and they are paying off.
We are capitalizing on the move to open research today under.
Under the pay to publish OE model revenue is a direct function of price and quantity of articles published we are achieving significant volume growth based upon the draw of our strong brands and the execution of our publishing strategies supported by the market strong underlying article growth.
Combined with strong pricing power. This volume growth is allowing us to achieve double digit OE revenue growth.
The recent acquisition of Hendawi further strengthens our growth potential I'll talk about this a bit later.
The second positive trends the growth of online degrees in hybrid education has accelerated significantly in the past year helped along by the pandemic.
Wiley has long been a gold standard strategic partner for universities, helping them to design and deliver effective degree programs and demand for these services continues to rise the school's plan theyre increasingly digital futures.
This has translated into double digit growth in online enrollment and new students starts both key indicators for future growth.
The third trend toward digital curriculum reflects the maturation of online content and courseware as the preferred media for effective learning.
This trend, which has been ongoing for years has benefited from the strong acceleration of online learning online education.
Happily the growth of digital content and courseware is outpacing the decline of print over the past fiscal year.
It seems that the world has figured out that our digital courseware, it's simply a more effective product that can be delivered at a lower price.
Do you see print products from <unk>.
Please point of view products like our XI book when more adoption.
And then gained significantly higher sell through and each adoption by Obsoleting substitutes, such as <unk> used books and rentals.
As you can see our strategies are directly aligned with these core market trends.
And in the direction that we're headed.
Wiley team delivered another strong quarter of execution and performance revenue was up 2% adjusted EBITDA was up 7% and adjusted EPS was up 6%.
Our Q3 revenue performance was driven by research with Hendawi contributing $2 million of inorganic revenue and strong organic growth in education services.
Solid adjusted EPS growth in the quarter was the result of top line revenue performance lower costs from business optimization, and Covid related savings offsetting 12 dilution related to the Hendawi acquisition.
Our GAAP EPS performance was impacted by a $21 million restructuring charge, primarily related to the reduction of our real estate footprint as we shift to more of a hybrid working model across Wiley.
For the first nine months of fiscal 'twenty, one revenue was up 3% over prior year to $1 4 billion.
Adjusted EBITDA was up 16% to $309 million and adjusted EPS was up 20 per 20% to $2 nine.
Free cash flow year to date was $80 million or <unk> $74 million higher than prior year due to strong earnings performance and lower Capex.
Our EBITDA margin for the nine month period was 22% compared to 19% in the prior year.
So overall, we're pleased with where we are after three quarters now, let's take a look at our three segments.
The key highlights for research publishing and platforms include our strong ongoing publishing output the strategic momentum in our platforms and our corporate offerings and the acquisition of <unk>.
Revenue was up 1% in the quarter and 4% year to date.
Research adjusted EBITDA was even with prior year as we targeted additional investment in improving our publishing infrastructure and workflows.
Our research adjusted EBIT margin was for the quarter, 34%.
Fully in line with our expectations, we've seen modest COVID-19 related pressure on our calendar year 'twenty. One journal subscription renewals. This pressure was offset by continued double digit growth in open access publishing and corporate solutions.
Research platforms continue to perform well with revenue up 4%.
Research article output continues to grow nicely up 17% year to date and research consumption being usage of the Wiley online library was up over 20%.
For context, our World class later on on content platform because hosted over 4 billion user sessions in the past 12 months and maintained a 99% client retention rate.
Notably our strategic read and publish agreements are succeeding generating publishing volumes from these deals that are exceeding expectations.
In the quarter, we signed a multi year reading published agreement with Italy, and we see a good pipeline ahead.
We continue to see opportunities in Asia.
We recently entered a 10 year strategic partnership with the Chinese Medical Association publishing House, one of China's leading health Science publishers.
We will be providing the online home for the entire CMA publishing portfolio and we will also launch 10 co published open access journals.
This important deal Leverages, our global leadership in publishing and platforms and further extend what extends Wiley unmatched Global network of Society University and corporate partners.
While these expanding research platforms offering includes the hosting and management of career centers for our partners that help researchers and other job seekers connect with great jobs.
In the quarter, we added the American College of Veterinary internal medicine, and the American answer Lodge Anthropological Association among others to our growing list of career center clients. As you can tell career advancement is a consistent theme across Wiley in both education and research and here we are helping the <unk>.
<unk> community to connect directly with their next jobs.
And the final months of the year, we are focused on closing out calendar year 'twenty, one subscription renewals, while continuing to advance our volume based publishing strategies and as always improving our efficiency.
For the nine months research adjusted EBITDA is up 11% for an EBITDA margin of 36%, although we anticipate a ramp up of investment in Q4 related to enabling publishing growth and the integration of <unk>.
Now I want to give you some insight into this recent acquisition.
<unk> is one of the world's fastest growing scientific research publishers in a true innovator in open access publishing in fact in value was the first subscription publisher to convert its entire portfolio of journals to OE nearly 15 years ago.
This addition, augments our strategy in three very important ways.
First in the OE brings a fast growing portfolio of over 200 open access journals that complements Wiley journal portfolio extremely well by expanding our portfolio and strategic discipline. We can seamlessly provide a high quality publishing home for more of the articles that are submitted to wiley growing our output and increased.
<unk> author satisfaction.
Second as an early leader in open access and Dowie has built an innovative publishing platform and our publishing process that is highly efficient very user friendly.
This has helped them to grow fast and profitably.
When combined with wildly strong platforms and services the Hendawi platform and their approach will enhance the efficiency the productivity and the customer satisfaction of the publishing process across Wiley.
Today in value provides its platform services to other publishers, who are adapting to the OE transition.
This can represent a real struggle for survival from many publishers in society. So the third way that we augment our strategy is by enhancing Wiley research platforms business by increasing the breadth of the offerings that we can provide to our market leading network of society and publishing partners.
We're very excited about joining forces with the excellent team at <unk> and leveraging all of that they bring to wireless.
Third quarter highlights for academic and professional learning include continued strong digital growth in education publishing and an improving outlook for professional learning as it rebounds from Covid, along with the overall margin gains from optimization.
Revenue was down 4% for the quarter due to declines in printed course material continued exam cancellations and test breadth and delayed purchasing pattern for digital products when compared to print.
The print decline offset 11% growth in digital content, including 45% growth in <unk> courseware.
Digital courseware Activations were up over 20% in the quarter and year to date.
The patients are a key performance metric for us and I'm pleased to report that our core wildly plus platform recorded 1 million Activations recently for the first time in its history and XI book has now surpassed 325000 users at over at over 900 University.
Professional learning saw significant improvement this quarter results for trade publishing with growth entitle output and E. Book sales are dummies franchise continued to be a bright spot with double digit revenue growth driven by timely publishing of new titles on hot topics, such as stock investing in remote learning.
We also saw positive developments in corporate learning with significant up sell growth at existing clients and a strong shift to virtual delivery and corporate training. This is a very positive development for this increasingly digital business.
Adjusted EBITDA for the quarter rose, 2% for an EBITDA margin of 29% year to date revenue on adjusted EBITDA, We're down 7% and 8% mainly due to COVID-19 related challenges.
In the fourth quarter, we will continue to execute on our strategy to grow digital content and courseware with as always on particular focus on high demand career disciplines.
Education services had a strong third quarter with double digit growth in online enrollment strong organic revenue growth and margins and the addition of new degree programs and University partnerships.
Revenue rose, 24% or 13% organically driven by 15% growth in student enrollment new student enrollment in our existing programs grew 29% an important leading indicator of future revenue growth.
Yes.
We signed full service partnerships with Tel Aviv University in Israel, Lebanon American University in Lebanon, and in the U S. New Mexico Highlands University in Spring Hill College.
We're also we also added a partnership with New York University for Unbundled services Wiley will support undergraduate graduate and doctoral online programs at these schools in a variety of high demand disciplines like healthcare computer science.
Our focus on driving strong profitable growth continues to bear fruit with an adjusted EBITDA margin of 19%.
This achievement, coupled coupled with accelerating revenue momentum reflects our focus on building a strong growth business for the long term.
We're doing it through our broad partner reach and our relentless focus on excellent outcomes through the student journey free application all the way through graduation, and in fact career success.
Wiley them three our last mile training service is gaining momentum as corporate demand for tech talent returns true strength.
As a reminder, <unk> one of the M. Three addresses one of the global economy greatest needs by finding training and placing job ready tech talent with leading corporations.
Placement growth is accelerating as companies continue to wrestle with the dearth of it and digital skills in the work force, we signed three new corporate clients this quarter, including two very important fortune 500 companies and we see a growing pipeline ahead as companies plan for the post Covid economy in.
In the fourth quarter in education services, we anticipate strong online enrollment growth to continue and the demand for online programs to remain high.
Across Wiley our global team delivered another strong quarter of execution efficiency and momentum.
I'll now pass the call over to John.
Thank you, Brian and good morning, everyone as Brian noted our team continues to effectively execute on our growth strategies and business optimization initiatives delivering favorable results and building momentum.
Our strong balance sheet consistency of annual cash flows and ample liquidity enable us to confidently invest acquire and return cash to shareholders.
Our improved year to date earnings reflect a 15% increase in adjusted EBITDA, including a 240 basis point improvement in our adjusted EBITDA margin to nearly 22%.
Adjusted EPS growth of 22% contributed to cash flow performance well ahead of prior year with cash from operations and free cash flow favorable to prior year by $66 million and $75 million respectively.
Capital expenditures, including technology property and equipment and product development spending were $75 million for the nine month periods running $8 million lower than prior year.
We continue to expect full year capital expenditures to be around $100 million.
With investment focused on developing and enhancing tech enabled products and services in our core growth areas and optimizing workflows, particularly in research.
We acquired Hendawi this quarter for $298 million funded by cash on hand, and borrowings from our existing revolving credit facility.
As noted at the time of acquisition Hendawi attractive financial profile includes strong revenue growth and EBITDA margin in excess of 40%.
And combining hendawi with wireless research business, we are well positioned to realize significant revenue and cost synergies and the acquisition is expected to be accretive to our adjusted EPS in fiscal year 'twenty three.
Our net debt to EBITDA ratio inclusive of borrowings shortened AOI was $2 two at quarter end.
With respect to acquisitions, we will remain opportunistic as we look to add scale and tech enabled capabilities and research and online education.
Our quarter end debt balance was $163 million higher than the same time last year due to acquisitions, while our interest expense was down nearly $2 million given the benefit of the lower interest rate environment.
In.
Ms of liquidity, we reported $91 million of cash on hand, and we ended the quarter with Undrawn credit capacity of $529 million.
Our current dividend yield is roughly two 7%.
We resumed share repurchases in early January following our announcement of the Hendawi acquisition.
Within our brief open trading window in January we spent $7 million on a 147000 shares at an average cost per share of $48 and nine.
Note 660000 shares remain on our 2016 share repurchase authorization and $200 million of Authorised purchases remain in our 2020 program.
We continue to design and implement material improvements in the efficiency and effectiveness of our operations and research we continue to invest in optimizing our end to end publishing operation driving improvements and publishing cycle time and cost per article.
As Brian noted, we will gain scale advantage from the addition of the <unk> portfolio to our article Cascade strategy.
In addition, and value operates a low cost publishing platform and efficient infrastructure, which we will leverage more broadly for open access publishing.
In academic and professional learning, we're investing in our e-commerce capabilities for both education and trade publishing and we're revitalizing our popular dummies dot com website with an improved digital content platform.
In education services, we are further improving our recruitment operations from lead generation through to student application and enrollment driving EBITDA margin performance in line with our profitable growth strategy.
As part of our overall business optimization program, we recorded a restructuring charge this quarter of $21 million related to.
Our previously reported 12% real estate footprint reduction.
We are permanently shifting to a virtual work environment for many of our smaller offices and implementing a hybrid working model at our larger facilities.
As a result of these real estate actions, we anticipate annual run rate savings from approximately $8 million beginning in fiscal 'twenty two.
And finally as noted last quarter, we continued to generate significant COVID-19 related savings on travel events and facilities expenses were taking actions to sustain much of these savings and our post pandemic operations.
Turning to our full year outlook, given our solid year to date performance and foreign exchange impacts we are raising our guidance for revenue EBITDA EPS and cash flow.
The raised outlook is inclusive of Hendawi impacts.
For revenue, we now project a range of one nine to $1 $92 billion.
Up from the previous range of $1 86, five to $1 85 billion.
And up from $1 83 billion.
In fiscal 'twenty.
At the segment level, we continue to project low single digit revenue growth in research and double digit revenue growth in education services.
So we're raising the organic growth projection for education services.
Mid to high single digits.
We continue to project a mid single digit decline in academic and professional learning.
Note our revenue outlook includes approximately $10 million of additional revenue from Hendawi.
Revenue growth business optimization gains and expense savings continue to fuel our strong profit growth.
Now anticipate adjusted EBITDA of $395 million to $410 million up from the prior range of $380 to $395 million and up from $356 million in fiscal 'twenty.
And now he is roughly neutral to EBITDA for the year.
We are modestly raising our adjusted EPS guidance to a range of $2 60 to $2 75.
Up from the prior range of $2 50 to $2 70.
And up from $2 40, and.
In fiscal 'twenty.
Our adjusted EPS outlook includes approximately <unk> 15 of dilution from <unk>, primarily related to transaction costs and purchase accounting impacts.
And finally, we are raising our free cash flow guidance from $175 million to $200 million.
I am sorry to 100.
$200 million to $225 million up from $173 million in the prior fiscal year.
The anticipated year over year cash flow improvement reflects higher earnings and relatively flat cash tax payments.
Including the $21 million cash tears.
Tax refunds, which we recorded last quarter that cash refund was received in early February.
And they always operating impact is projected to be cash flow neutral for this fiscal year, but we anticipate it to be modestly cash flow accretive in fiscal 'twenty two.
While delivering these results we will continue to invest in market driven growth opportunities and open research online education and digital curriculum and then our optimization programs to generate sustained efficiencies. We will continue to fund these investments through those optimization savings and strong cash generation.
I'll now pass the call back to Brian.
And John.
So let me recap the key takeaways from the third quarter of.
Our business has remained strong through the year, thus far and a challenging year for all we've continued to execute our strategy, which builds on the core trends in orange in our important markets, namely open research online education and digital curriculum.
As a result, we're growing research output significantly and growing our digital platform business, we're growing the adoption and consumption of high impact affordable digital content and courseware.
We're growing enrollment in a high quality career focused degree programs.
We are expanding our unmatched network of leading universities societies and corporate partners. This unique asset supports wiley success across research and education.
We continue to selectively advance our core strategy is doing M&A, adding hendawi this quarter to accelerate our open research growth strategy.
And we are consistently working to improve our efficiency on our profitability.
The upshot is that the Wiley team has delivered solid results for the quarter and year to date and this is allowing us to raise our full year outlook.
As always Wiley is performance as the team effort year in year out our wonderful colleagues around the world demonstrate their dedication to each other to our customers and to our important mission, which remains to unlock human potential through the advancement of research and education.
I. Thank the team for extraordinary efforts and its many accomplishments and I will now open the floor to any comments and questions.
Okay.
Thank you at this time if anybody has a question. Please press star one on your telephone keypad.
And that is sharp on on.
Telephone keypad. Your first question comes from Daniel Moore.
T K security.
Securities Your line is open.
Brian and John Good morning, Thanks for taking the questions.
I did.
I wanted to a lot of color on Hendawi, but did want to pick up there as well, Brian maybe just give a little bit more color into the.
Potential revenue synergies that you've described or alluded to over time.
Just how the two fit together and how you see that one plus one equaling a little bit more than two.
Yeah, absolutely so as a baseline hendawi is obviously an extremely successful company in and of itself. It was growing very rapidly and was nicely profitable as you know.
But by becoming part of the widely portfolio.
<unk> is a one plus one equals three.
It is really critical as we move forward.
That we maintain scale and.
Gross scale, but that we grow scale on the right ways.
The number one way that these two companies Wiley and Hendawi complement each other has to deal with the exploitation of that scale.
Which we've talked about in a variety of of calls.
Researchers want to get their research out to the world in the best possible Journal.
Quickly as they can in that order.
And so what they do is they choose a journal.
Wanted to say one of our leading health science journals and they submitted to that journey.
Sometimes that article gets accepted sometimes it gets rejected.
If it gets rejected.
There is forced to resubmit that journal somewhere else.
To the extent that we in our portfolio have a high quality journal that fits that article better. We can move the article from journal one to journal to order Journal III or the journal for and we can do it quickly and seamlessly and this is an important part of our <unk>.
And part of our strategy, thereby allowing the researcher to get their article out faster so.
I think you know Dan we today.
Published about 25% of the articles that we received.
We believe that there is the opportunity to publish that even more.
Published even more greater percentage cigna.
Significantly greater percentage of those articles, we know this because those articles get published elsewhere and so we track them and we see that a large portion of the articles that we reject get published elsewhere. So if we have an apex or very high quality title.
On the.
High quality title and then we have in our line setup journals and Thats, what Hendawi does it aligns with our journals in these high demand disciplines extremely well and they're not just journals that are unrelated to our journal that was one of the great pieces of.
Synergy we identified then we can run the run a higher percentage of the submissions through publication and as you know in the OE P Times Q model, then we can monetize those even better so scale really matters and high quality scale matters. So youll see published publisher like us with a high <unk>.
Quality.
Portfolio of titles aligned with a good cascade mechanism to do very well.
Second way.
Is that Hendawi is is also a very.
As a very strong process that was uniquely created and tailored to the open access experience.
That's a platform and its processes, whereby which they can process on open access article much faster than is typically the norm in the industry and that process helps us at Wiley to have greater author satisfaction, because they want to get it out there quickly they want to get their article out there quickly and so we can we can take those lessons and moved them across.
Wiley both the platform and the processes that allow us to enhance the wiley platforms and processes. Conversely, we have many platforms and content management that are far more advanced than what than what in DAU as a small company could possibly have invested in so we can bring those efficiencies and content management and so forth.
Hendawi.
And then of course, we have a very successful corporate.
Our successful research platforms business built on our Literatim platform.
That is sold to publishers and societies around the world.
And we have a very successful solutions business, whereby which we support society and publishers in their in their efforts and we can take those great hendawi assets and we can add them to our assets haven't even more robust offering out there in the marketplace.
This really is a case, where we can take full advantage of Hendawi hendawi can take full advantage of us and we can go forth into the open access world with really an unmatched.
Set of capabilities, the very exciting and as you know as we move toward debt the OE P times Q model.
There's a lot of opportunity to the extent, we can attach ourselves.
More closely to the consistent growing article.
Submission rate that happens around the world every year.
Submissions grow in high single digits every year.
That's very helpful and I just want to confirm I think you did say dilutive for the year by <unk> <unk>.
On the included 12 in fiscal Q3 is that right John.
Yes, that's correct.
Got it.
And on a push you, but do you see the potential at least for the deal to be maybe accretive on it.
A little faster than your fiscal 'twenty three goal or are there discreet.
Investments that you intend to continue to make.
And it.
I think it's a little early first the call then we've only had the team on board with US now for two months, we feel very good about the progress that we're making and the rate at which the business will grow but we can give you an update on that when we come back around with our expectations for fiscal 'twenty two in June.
Sounds good.
Gears education services margins once again.
Really strong.
Easily exceeding the 15% goal I'm wondering if you don't see maybe a little bit of that.
That goal is being modestly conservative or do you see an opportunity to perhaps accelerate investment given the strong results we've seen.
Yes.
It's a great question on I can certainly understand why you're asking.
The answer is we have a growth business here a growth business in a changing market. We are a leader we intend to continue to be a leader and we continue to continue to treat it as a profitable growth business.
At 15%.
We are very comfortable at that 15% plus.
On a number that we put out there for a long time and we're going to continue to look for opportunities to invest to keep our growth rate.
Good and in higher as you as you know this debt a business that has a higher profitability rates than ever before and we're very pleased with that but we also recognized the huge potential that exists in the transformation of education from traditional to hybrid and online.
And in many ways. This is our moment to capitalize on that and we need to be we need to be targeting those opportunities to bring on new partners to stand them up to make them successful and to ultimately grow our enrollment in the breadth of our services that we provide to those people. So so I think we're going to stick with 15% plus is the answer.
Understood certainly makes sense and maybe one more and I'll jump back from Q.
Academic <unk> professional learning.
I think.
As we said it looks like courseware is.
Now offsetting the declines in print.
Just talk maybe about your confidence in.
And that on a go forward basis, and similarly in professional learning with vaccines accelerating it sounds like your corporate professional partners are feeling a little bit better any more color or commentary there would be really helpful.
Both good questions so with respect to.
With respect to the education publishing side, we really are optimistic about the trajectory and what I called in my comments the maturation of the of the digital courseware market.
We're very pleased with our offerings, we feel very strongly about and we love the trajectory that we're on.
Having said that.
We still have a good portion of our business that sprint and print will continue to decline. The good news is that we are gaining units dramatically in unit share.
So while we're not ready to call bottom and in terms of that trajectory.
We do like where it's going we're exceeding we're increasingly optimistic and.
It's always it's always a great temptation to say now is the moment, but I think what we can say is we have a business that is moving.
<unk> in the right direction, where the price value proposition has normalized to an extent that people are buying the products that we are selling instead of looking for alternatives. There are substitutes and if the growth rate of XI books isn't an example of that I don't know what is so so we're feeling good about it and and.
<unk>.
And so we're going to avoid we're going to avoid a specific statement about an inflection point per se.
But but the trends are going definitively in the right direction.
Great and then on the on the professional side.
Youre seeing some green dot it there as well, yes got it so sorry, I forgot part too.
The professional learning.
He is most definitely rebounding as you may recall, we were down up to 70% in our in our businesses that support in person training in the beginning.
And we were very worried about corporate budgets and the like and what we're seeing is that our retention rate on our upsell rates in our in our corporate learning business is very good and so where it's been a little troubling for companies as they have been trying to look out into the future but.
But we had some concern as you know about what happened when we cross into calendar year 'twenty, one but in fact are up sales in our retention have remained high.
Our pipeline looks looks very good and in the parts of our business debt that support in person training that part debt was down 70%, 70%. We're now back up to two between 80 and 90% of where we were before which is terrific given that we're still in a significant COVID-19 situation.
And one of the main reasons debt, where there is that 85% of our trainings are now done virtually so yes, it's bouncing back on both sides, we like those businesses those parts of our business, they're going to continue to do well and come back and I think we're really we're really on the right trajectory, but also.
This movement toward.
Toward virtual team training and virtual professional development.
Wood Houston require items structure in front of the classroom.
As a really optimistic.
Optimistic development for those businesses and frankly, it has far exceeded that transition has far exceeded my expectations.
Spurred by.
Covid I don't think we would've moved anywhere near as fast there. So once we get back obviously, we need to get back to where we were before and 85% of the 100% but.
But I'm really pleased because obviously when we go digital we not only have a business that moves into more sustainable and recurring revenue models, but great profitability and also we can reach much larger audiences. When you don't have to get a bunch of people together in classrooms.
We're not exactly where we want to be.
And you can see by the by the segment segment financial but the trajectory again.
Is where we want to go on a consistent and aligned with the widely strategy.
Really helpful I'll pass it off and perhaps circle back if there are no others. Thanks.
Thank you.
Okay, and if anybody would like to ask a question. Please press star one on your telephone keypad. Your next question comes from Greg <unk> from Sidoti. Your line is open hey.
Guys. Thanks for taking my questions.
I guess first off can you help us understand a little bit around the swings on accounts receivable they seem to have spiked in <unk> and then came on.
Way down in <unk> can you give us a little color on that.
On a year over year basis I'm talking.
The.
So youre looking at the comparison back to.
Year and April was that where you're from Baird.
Correct, yes.
I'm just trying to gauge the seasonality.
A large spike on a year over year basis and on receivables in <unk>.
And on a year over year basis. It looks like it came way down just kind of trying to triangulate that with where you might end up the year and receivables so that I understand your.
Cash flow guidance, a little bit better.
So there is there is a good bit of seasonality to our receivables.
A lot of that seasonality swings around the timing of our subscription renewal.
<unk>.
As well as we've introduced some other elements to our business. The addition of <unk>.
<unk> III and value to our business. So there are things some things that are going to.
Inorganically move around our receivable balances as well.
What I would say is that you should.
You should be aware that from a collections perspective, our collections performance continues to be strong we have not encountered any significant issues in terms of defaults.
We do have a little bit of upward pressure on receivables coming from.
Some of our customers who are.
Particularly on the library side struggling a bit with.
Budget challenges and so have had.
Challenges around payment schedule. So we've extended in rare cases.
The payment periods for our customers trying to be accommodating to their particular budget challenges, but overall most of what youre seeing is seasonality as I said and what youre not seeing on what would be really clear about it is there any risks around collectability.
Understood.
And then just switching gears, just trying to understand that new student growth.
And just kind of if you could give us a little bit more.
Color behind why I think you said it was 29% and <unk>.
Just trying to understand is that reflective in addition of some of the new.
New account wins or.
Just trying to understand do you think those will be full time.
Students or is there going to be maybe a lower retention rate given COVID-19 on on that new student Spike.
Yes Super question. The first thing I'll say is answer the last debt.
We have exceedingly high retention rates through to graduation in our online programs. It has been consistent throughout this throughout the.
The period, leading up to Covid and through Covid, we see no evidence that there would be any increase in.
In.
In.
Deterioration of our retention rates.
In the in the go forward period. So we're very pleased and by the way, we're really proud of that because we are in the business of getting people degrees affordable degrees that get them jobs and so to the extent that we as a company don't focus on impacts first we will lose in our and our clients will lose on the students will lose and that's unacceptable.
So now where is it coming from.
On the answer is it is.
Certainly our new our new clients or we will take a little while to stand up there's always there are always new new clients coming on line and inside new clients, we are always adding.
Adding new programs and then most importantly, we're trying to grow those programs that we do have the degree programs and Thats, where it is coming from it's really coming from the existing clients on existing programs.
To be sure, we're always adding new ones, but thats not the core here. The core is endemic underlying growth in interest in online education and in the success with which we are we are finding students.
Efficiently and effectively which is what drives our terrific profitability, we find them efficiently effectively we match them up with a program that works for them at a university that works for them.
And we ensure that they are successful through congratulation. So this is this is not some cyclical or COVID-19 related.
On.
Sort of sort of move this is the way we've been over time, having said that of course Covid has.
Accelerated the interest in online.
Degrees, but we believe a large part of that is permanent how much remains to be seen so that will be sorted out as we get toward next year and so forth, but once you're once you are in the program, we expect retention rates that are.
As outstanding as the retention rates, we have always delivered to our clients and to students.
Great and then just one final one just trying to understand.
The 25%.
<unk> article percentage.
And I appreciate all the color on DIY, but also if im not mistaken.
Some of these some of the opportunities were missed in the past was it due to not having the right systems in place to find.
That article might land and that's why you sort of lost that article opportunity I don't want to throw the word AI, but I believe you're building a system that would hopefully identify.
A.
Where some of these submissions could go is that correct and where are you. If so where are you on the process.
Yes, the topic is a really important topic I would not agree that we lost or missed opportunities. What I would say is that there isn't unexploited opportunity that exist that has always existed for all publishers and exists for us to do a better job we've been on a pathway from the old print World, where you had <unk>.
<unk> number of articles that you could squeeze between two pages and ship out the people to the digital world, where they're sort of on.
Unlimited shelf space and through that process.
On the.
<unk> editorial standards must remain high.
But with high editorial standards, we want to try to find a home for for all those articles.
25% is just fine rates, but its not good enough.
So I wouldn't characterize it as a deficit, which really for us it's an unexploited opportunity and yes. You are absolutely right. We are working very hard to make the process to organize ourselves to develop the systems, including AI driven.
Submission and editorial review systems that allow us to process articles faster and to route them to the appropriate journal faster and then should they be rejected by that journal.
Send them on to their next journal and asked me what the others permission for submission to another journal, we're absolutely investing that youre, absolutely right to focus on its hugely important.
And we do think that there is that big opportunities as a source of significant investment for us when we do it.
We gain a higher return on investment because we publish a higher percentage of the articles, but we also make the authors happy this is what they want but they.
They don't want to have to go through another month multi month process of submitting it to another journal, where they have to get the review and I would also agree with you that in the past we haven't been in all publishers havent been as efficient as they could be and we're also moving from a largely manual process to a very much automated process, which is the point that you've.
Very wisely underlying and that automated processes.
It's a great focus for us and great opportunity going forward.
That's very helpful. Thanks, a lot.
At this time I have no further questions. Thank you.
Call back over.
King on pack.
Closing remarks.
Terrific well, thanks again for joining us today, and we will very much look forward to sharing our fourth quarter results and full year results in June.
Thank you everyone that does conclude today's conference call you may now disconnect.
And.
Okay.
[music].