Q4 2021 John Wiley & Sons Inc Earnings Call
I'll now turn the call over to wireless President and CEO, Brian Nathan.
Well good morning, everyone and thanks for joining us on this.
Start by acknowledging our colleagues customers and partners and India, Sri Lanka, and Brazil, and elsewhere around the world, where they're still struggling mightily with COVID-19.
We all look forward to a day when this terrible crisis is behind us.
This past year's profound health economic and social challenges continue to remind us.
Wiley of the importance of what we do.
We enabled scientific and medical discovery, Repower education, and reshape the work force it tomorrow.
Through our work Wiley as the business is committed to unlocking and human potential, which we need now more than ever.
Fiscal 'twenty, 1 was a good year for Wiley.
<unk> strategic focus on open research and career connected education paid off and we saw strong financial performance and increasing momentum.
Our market.
<unk> began to emerge from long periods of transition and they demonstrated strong demand for fully different differentiated digital products and services and for business models that work for both Wiley and for our customers long term trends such as open access and online education were pulled forward by the crisis clarifying what the future of research and education.
And we'll look like and strengthening our growth outlook.
While these debt.
Execution.
In this most challenging year was exceptional our team around the world adapted well to a fully virtual work environment and very fast changing market conditions.
They took good care of our cash.
It is during a time of great need while while continuing to drive our strategy forward and improve our operations.
Notably our colleague engagement worldwide has risen significantly during this period.
1 reason for the high engagement as our people deep belief and unique impact that they have on society yearend and year.
Customer more researches and alone as we help to succeed the greater the impact and there was a lot of opportunity for impact this year.
Overall fiscal 'twenty, 1 with year on which we continued to execute on our strategy and in which the market told us that we were on the right track long term opportunities are expanding and open research and career connected education.
And we're going after them.
During the year, we saw the acceleration of 3 long standing trends that define our market.
Shift toward open research and migration toward online and hybrid education, and both University and corporate setting and the increased adoption of digital tools and courseware for learners as you know.
Wiley strategies are tightly aligned with these trends.
We're capitalizing strongly on the growth of Oak and research where revenue was a direct function of the quantity of articles published and the price we charge.
And we realized significant volume gains and fiscal 'twenty, 1 based on the quality and breadth of our journals and on the excellent performance.
Performance of our strategic read and publish agreements.
These volume gains and driving double digit OE revenue growth.
The demand for online degrees and credentials accelerated significantly through the year pace and by the pandemic.
Is it did Wiley network of leading universities and corporate partners.
No enabled learners to improve their career prospects through education, and consequently enrollment was up significantly.
Wiley has long been a strategic partner for both universities and corporations, and our services, where and high demand as institutions plan for their hybrid futures.
This move to digital.
<unk> education also drove an accelerated shift toward digital curriculum.
Our volumes were up significantly on digital courseware products, such as the highly effective <unk> <unk>.
Merged as the preferred learning toolset in today's world of anytime and anywhere education.
Wiley is a leader in digital courseware, and we continue to realize significant growth and adoption.
And <unk> and usage.
As the market does increasingly non traditional new opportunities are opening up for companies like Wiley that can deliver for learners wherever and whenever they choose to learn.
At Wiley, we are highly motivated by our environmental and social responsibility both on our core lines of business.
Digital net and as a global corporate citizen.
In February we signed the UN global compact a pledge to drive business actions and support of achieving specific sustainable development goals by 2030.
As a company committed to research and education, while these growth strategies and sales have impact and our success leads.
Business ever.
<unk> societal benefit.
For example, the rapid growth and open research output means that more cutting edge knowledge is being delivered to the world faster and more openly so it can have more impact.
We think and we said for our work and education with a growing reach of our career connected offerings we've directly.
To unlock and career potential for millions of learners, many of whom would not have otherwise had access for the opportunity.
Across Wiley, we're always looking for ways to increase access and lower costs for those most in need 1.
1 example is our long time partnership with research for life.
Through which we provide free or low cost access to.
And in developing countries.
More broadly and widely work to ensure a vibrant research ecosystem directly advances the UN sustainable development goals and areas such as good health and wellbeing and climate action.
While he is also finding ways to improve access to high impact education from lowering the cost of courseware, which.
Condo and to delivering faster and more targeted career credentials to extending our footprint and underserved market.
Our and 3 technology career program and India for example targets at risk populations such as candidates for the first and their families to access higher education and target those from households, earning less than 5.
We've been into the month.
Notably over half of our candidates for credentials and India are women.
By actively targeting impact and this way Wiley is helping to fulfill UN sustainable development goals for quality education and reduced and our qualities.
We're pleased to report that Wiley achieved.
Carbon neutral certification for fiscal 'twenty and our fiscal 'twenty..1 measurements are now getting underway as it predominantly digital company, we will continue to drive reductions and our carbon emissions by reducing the companys production of printed products, such as books and journals and by pursuing a broad green client.
During the year.
<unk> hundred dollars signed the CEO action for diversity and inclusion.
CEO action as a significant commitments and sustained concrete action that advances thinking behavior and business practices and the workplace.
While we also proudly received and a grade and the MSCI ESG ratings report and.
And a perfect score from the human rights Foundation for LGBTQ workplace equality.
And in industry level as the chairman of the Association of America, and publishers I am personally advancing too ambitious initiatives industrywide, 1 on sustainability and the other on <unk>.
And I.
While we will continue to drive impact both as an enabler of discovery and learning and through corporate responsibility across our global footprint.
Now ill review our results for the quarter and then through the year.
The team delivered another quarter of strong execution.
<unk> and performance revenue rose by 10% adjusted EBITDA by 21% and EPS adjusted EPS by 41%.
Research revenue for the quarter was up 9%, 4% organically.
And by continued momentum and open access corporate solutions and research platform.
Platforms.
<unk> grew 12% largely by strong.
Demand for content and courseware across both education publishing and professional learning.
This growth was helped by and accelerating recovery and corporate training.
Education services rose, 7% driven by growth and degree <unk>.
Coleman.
And and 3 job placements.
Earnings growth was largely fueled by strong profit performance and APL and Ed services, driven by both revenue growth and significant cost structure improvements.
This offset a decline and research due to investments and editorial capacity.
Graham and will fuel our further growth.
And higher annual incentive compensation related to fiscal 'twenty 1 performance.
For the year widely reported strong growth across all financial metrics revenue was up 4% adjusted EBITDA up 16% and adjusted EPS.
The 27%.
Free cash flow for the year was up 48% to a historical high of $257 million.
As you can see it was a good year, especially insight in light of the considerable COVID-19 related disruption.
John will walk you through the cash flow and capital allocation later in the present.
Presentation.
I'll now turn to our segment performance.
Wiley research delivered another strong year with revenue up 5% with 3% organically.
This was fueled by consistent execution of our strategy to take advantage of the increasing global demand to publish and to access research.
And ups and.
Adjusted EBITDA rose, 6% for full year EBITDA margin of 35%.
Research article output continues to grow nicely.
This volume growth supported by strong open access pricing power resulted in double digit growth and our OE revenue.
So a growth more than offset.
Research and modest pricing pressure that we saw on our subscription business due to COVID-19 impact on library budgets.
Our strategic read and publish agreements what we sometimes refer to as transitional agreements continue to contribute to robust growth and publishing volume.
During fiscal 'twenty, 1 we signed multiyear agreements.
Offset and <unk> in Italy, Ireland, Spain, and Switzerland.
And <unk> the innovative OE publisher, we acquired in December is already adding significant value as we integrate its fast growing collection of 200 Journal.
As noted we anticipate significant revenue synergies from the expansion.
What can our journal portfolio and by offering a broader range of platforms and services to our existing society and publishing partners.
We are well along and the integration of <unk>.
And it is going very well.
Wiley Research is also seeing continued strong momentum from our platform corporate solution.
Illusions and society publishing volume.
Of note is the success, we're seeing and the career centers that we manage for corporate and Society partners. We.
We recently signed up Glaxosmithkline and Pfizer among others.
We're also seeing continued success and the addition of New Society publishing business.
With net wins for calendar year, 'twenty, 1 worth over $10 million annually.
Other.
Other noteworthy.
Other noteworthy developments and research from the past year include the following.
And just 12 months later item usage grew by 31% to $4.6 billion user session while the platform.
Trained and 98% client retention rate.
We are increasingly leveraging our broad product offering and publishing and platforms.
And expansive new partnerships with major society, such as the Chinese Medical Association Publishing House, and the American Association for the advancement of science or the triple layout.
During the year, we continue to build our proprietary journal portfolio, including launching a major new flagship journal called Natural Sciences.
Re created in partnership with the influential project deal consortium out of Germany.
We're very excited about the potential of this journal.
And internally, it's critical that we don't take our eye.
<unk> ball through fiscal 'twenty, 1 we continue to make significant gains and the efficiency of our publishing operations, while supporting our unprecedented volume growth.
Over the past few years.
While it took a strong position.
The standard is a strong ally to the evolving.
The <unk> sector.
We chose to be bold and to move deliberately towards new publishing models and platforms actively pursuing strategies that align us with the market and that puts a researcher first.
The result has been a steady upward revenue trajectory from 2% organic and fiscal 'twenty to a mid single growth outlook.
<unk> <unk> 22.
From where we sit and market trends remained favorable science.
Scientific research investment and output continue to grow nicely and research is increasingly integrated into both corporate strategy and government policy around the world.
1 important macro indicator.
Global R&D spending is forecast to rise by 5% and calendar 'twenty 1 and.
And the published peer reviewed research will continue to be very strong and access to that research the central.
Looking forward Wiley is and a great position to meet the growing needs of the global research ecosystem.
Now on to academic and professional.
And we're learning.
I am pleased to report that our education publishing business returned to modest growth this year.
It did so during the combatant due to the combination of a winning publishing platform favorable market dynamics and consistent customer centric strategies, which include the multiyear buildout.
Out of our courseware portfolio and a tight focus on high demand disciplines and careers such as Tech education.
And professional learning, we continue to see steady recovery from the impact of Covid, driven by strong momentum and our professional publishing program.
And by the continuing recovery of corporate training.
And I said COVID-19 with highly disruptive to in person and corporate training and test prep and we had to navigate through that for the year APL revenue was down 2%.
Though the fourth quarter saw growth and 12% compared to the Covid impact in fourth quarter of last year.
Adjusted EBITDA and accelerated in the second half of the year driven.
<unk> revenue performance and gains from optimization, we finished up 4% and a full year EBITDA margin of 25%.
Other APL highlights from the year include the following.
Our Wiley plus platform recorded 1 million Activations for the first time and revenue from our side.
And by program increased by over 50%.
Now with over 400000 subscribers.
We launched a partnership with southern New Hampshire University, the largest nonprofit provider higher education, and the United States with 175000 students.
Together, we are redesigning their and.
Books program to allow learners to complete their degree and 1 year at a materially lower cost.
This is a good example of why these broad ability to help universities succeed by supporting their evolution with great content.
Great services, and leading edge innovation.
Finally, I'm happy to say.
NBA by well known Dummies franchise grew 9% confirming the longstanding appeal of this customer of this consumer focused brand for many millions of learners.
We've been quite deliberate and our strategy to grow and optimize academic and professional learning and I'm pleased to say that we expect to return to growth in fiscal 'twenty 2.
It's too early to comment on fall enrollment, except to say that we don't anticipate the same undergraduate enrollment headwinds that we saw last year. Despite some COVID-19 induced uncertainty that remains and the system.
We expect to have a better view of enrollment as we get closer to the start of the school year and in the fall.
While it is hard.
To predict the post COVID-19 future. It is clear that the transition to online learning will continue to drive the increasing adoption of digital content and courseware and both academic and corporate settings.
Professors and students alike are now beyond the tipping point and are readily adopting and implementing fairly price digital programs to support their learning journey.
Corporate leaders are increasingly focused on real time development of their teams to fill skill gaps.
Which is similarly, driving demand for digital content and platforms.
All of this bodes well for our API offerings as the labor market drives and increasingly for wireless career connected content and services.
Fiscal 'twenty, 1 and was also a good year for edge services segment with Covid as a contributor to online enrollment for.
For the year revenue rose, 21%, 7% organically powered by 14% growth and student enrollment and 20% growth and new student starts adjusted.
Adjusted EBITDA more than doubled this year as our focus on optimizing the student.
And the journey from lead the graduation and began to pay off.
We finished with a full year EBITDA margin of 18% up from 9% last year.
Beyond our strong financial performance, we saw on number of other notable achievements during the year.
The team signed 8 full service institutional partners partnerships, including the University of Montana.
And at Latrobe University, and Australia, Tel Aviv University, and Israel, and this quarter, Norwich University and Vermont.
We also added important partnerships for unbundled services, with New York University, and the University of Wyoming.
Building on the online catalogs of our existing partners is always a top priority.
And we added over 40, new degree programs at existing partner schools and areas ranging from business and health care to computer science and public administration.
Despite COVID-19 headwinds and the early stages of the pandemic with Gainesville, Mentum with Ns III.
Through the year as corporate demand for tech talent accelerated.
And the fourth quarter, we signed 4 major global corporations. Following 3 that we signed and the third quarter. We also delivered record placements with existing fortune 100 customers, we head into fiscal 'twenty, 2 with great momentum here. The pipeline is strong and we're expanding in new markets as a global player.
Around.
The world demand continues to grow for high quality career focused online degrees and job ready talent over the past few years, we've been focused on meeting these needs by building a solid foundation for durable profitable growth and net services.
And this begins with delivering an exceptional value proposition to our university and corporate partners.
It also means serving them efficiently and profitably, which is what we are doing.
Raised our EBIT margin from 3% into the Covid, 19% to 18% and fiscal 'twenty, 1 while also achieving significant revenue growth.
With this foundation in place, we can set our sights on meeting demand with low teens organic revenue growth expected in fiscal.
Indeed, 2 up from 7% this year.
Looking ahead, we expect universities to continue to actively transition to hybrid online degree delivery and we will continue to enable their success by delivering high impact learning experiences.
We expect demand to remain strong for academic credentials as students and professionals look to differentiate.
Themselves and a competitive labor market.
This will include increasing demand for new forms of targeted credentials that are quicker to get more affordable and that give workers the precise skills they need to succeed.
The pandemic has only accelerated and need to close the talent GAAP.
Whether by helping our University partners deliver graduate that can hit the ground.
Running or by helping corporations to identify train and place great talent.
While it will play a major role and creating a labor force for the post pandemic economy.
I'll now pass the call over to John for more detail on our financial results.
Thank you, Brian and good morning, everyone as Brian noted.
And the wildly team has made significant progress and refining and executing our growth strategies, while also driving important gains and operational efficiency and effectiveness.
Our improved revenue and profitability in fiscal year 2021 is clear evidence of our strong momentum.
Boeing and extended.
And at period of limited revenue growth.
Now, we anticipate organic revenue growth of 5% or more and the coming year.
We will continue to invest and the expanding opportunities and our markets and research we will publish more to meet global demand leveraging hendawi to drive open access revenue synergies.
Energies and we will go broader with polishing and platform offerings for societies and corporations.
And career connected education, we will continue to expand our online degree programs and drive online enrollment scale, our digital courseware portfolio and expands it talent development pipeline.
Along with our base of corporate clients.
Finally, and our relentless pursuit of operational excellence, we will continue to expand publishing capacity and workflow automation and drive student acquisition improvements and enhance our direct to consumer capabilities, including our E Commerce experience.
Looking ahead and out of fiscal 'twenty, 2 total Wiley revenue is expected to exceed $2 billion for.
For the first time and our history growing by mid to high single digits to a range of 2.07 to $2.1 billion.
For the year, we anticipate revenue growth and all 3 segments.
Putting mid to high single digit growth for research low single digit growth for academic and professional learning and low teens growth for education services.
Adjusted EBITDA is expected to range between 415 and $435 million with profit gains on higher.
Air revenue tempered by investments to accelerate growth and research and education services, accompanied by higher <unk> expenses due to the resumption of in person business activities.
Adjusted EPS is anticipated to range between $2.80.
And $3 <unk>.
Reflecting.
And higher depreciation and amortization expense related to investments and acquisitions, along with a higher effective tax rate.
Capital expenditures, including technology property and equipment and product development spending are expected to range between 120 and $130 million compared.
$103 million and fiscal 'twenty, 1 as we invest and the previously noted growth initiatives.
While these free cash flow generation will remain strong, although we will continue to see some variances from year to year.
Wiley generated $173 million of free cash flow and.
<unk>, 2 <unk> and $257 million and fiscal 'twenty 1.
Fiscal 'twenty, 1 performance was driven by strong cash earnings lower Capex and a $21 million cares act related tax refunds and reported in Q2 and received in Q3.
Looking ahead.
Fiscal 'twenty, 2 we anticipate free cash flow of approximately $200 million to $220 million.
While cash earnings are again expected to be strong, we see certain headwinds as compared to fiscal 'twenty, 1, including $20 million to $30 million higher capex in fiscal 'twenty 2.
Higher.
And net cash taxes and fiscal 'twenty 2 due to the cares act related tax refund received in fiscal 'twenty 1 and.
And higher annual incentive compensation payments to be issued and the first quarter of fiscal 'twenty 2 for above target performance and fiscal 'twenty 1.
Our strong.
Balance sheet and cash flows over time and enable us to confidently invest acquire and return cash to shareholders as.
As previously noted fiscal 'twenty, 1 free cash flow of $257 million was 48% higher than the prior year.
Capex was $103 million for the year.
<unk> 5 million lower than the prior year due to delayed investments and the early days of Covid.
As a reminder, we acquired OE publisher 10, Dowie this year for $298 million.
As we noted at the time of acquisition and attractive financial profile includes strong.
While digit revenue growth and EBITDA margins in excess of 40%.
Our net debt to EBITDA ratio inclusive of the Hendawi acquisition was 1.7% at the end of April compared to 1.6 last year.
Our strong cash flow for the year compliments and a healthy balance.
Doubled with more than $90 million of cash on hand, and undrawn revolving credit capacity and excess of $660 million at year end.
Approximately 30% of our free cash flow was allocated to the dividend this year and the dividend was raised for the 27th consecutive year on.
Our current.
Current dividend yield is a little over 2%.
And finally share repurchases were lower due to cash conservation and the early months of Covid.
Since resuming repurchases in January we acquired approximately 310000 shares at an average cost per share of $50 and 93.
This sheet notwithstanding the reduced level of share repurchases. This year, while we maintained its strong track record of returning cash to shareholders with dividends and share repurchases totaling $93 million.
I'll now turn the call back to Brian.
Thanks, John.
Let me quickly summarize the key takeaways before I open it up to Q&A.
Fiscal 'twenty, 1 was a good year overall for Wiley as our growth strategies and open research and career connected education took firmly.
These growth strategies continue to benefit from long term market trends, which had been pulled forward significantly and in the past year.
So despite COVID-19 related headwinds these strategies and favorable market dynamics growth stronger performance and increasing momentum across the company.
We expect long term opportunity to expand and open research online education and digital curriculum.
Nonetheless, we must remain focused and vigilant as we step forward into.
And to the uncharted post pandemic world.
That said, we play and fundamentally good markets and at our core Wiley remains a very strong company with exceptional brands, a solid financial position and powerful growth engine.
And as an impact company, we're powering discovery and learning worldwide and through this unlocking.
Unlocking the potential.
All of us at Wiley very proud of our purpose and we're highly motivated to expand our impact by doing whatever we can to increase the success of on millions and millions of learners and researchers around the globe.
In closing.
And I want to thank our wonderful Wiley colleagues for their truly <unk>.
Marketable accomplishments this past year.
And they demonstrated resilience and the dedication to each other and also to our mission.
They delivered results for our customers and our shareholders all on the face a significant disruption.
And very proud to work with each and every 1 of them.
I will now open the floor to any comments.
And questions.
And as a reminder, if you would mark the answer a question. Please press star and the number 1 on your telephone keypad and it feels like the return on your question press the pound key we'll pause for just a moment to compile the Q&A and foster.
Your first question comes from Daniel Moore with CJS Securities. Your line is open you may ask a question.
Brian John and good morning, Thanks for the color and thanks for taking the questions.
Good morning.
Start with the obviously the top line outlook is really encourage.
<unk> generally across the board and start with research, where you raised the outlook to mid to high single digit growth first I guess, it looks like price any lingering pricing pressure from colleges and universities from Covid seems to be abating is that correct.
And second are.
Are you seeing.
Is the.
The increase largely from open access accelerating.
And then I have a quick follow up on publishing as well.
Yeah.
And although they look.
It's a great question, because ultimately our future is defined by the.
And as defined by the health of our of our pumps.
Publishing programs.
Rams and and the balance between our subscription businesses and our OE.
I would not say that the pricing pressure has abated because the university ecosystem worldwide.
To be under significant financial pressure having.
Having said that what the last year has demonstrated is that.
Our.
Our research or high quality essential content on.
And are something that library and universities are simply not willing to go without.
So we expect to see some continued financial pressure, but.
But again, what we've said many times is that that pressure.
We will be modest and it will continue to be more than offset by the second half item that you referenced which is our OE growth, which we continue to see significant growth and with submissions up and the.
And in the upwards and 20% and output up and the in the mid mid teens and as that happens and we move as.
To a P times Q environment that continues to drive revenue growth and a very direct way, especially considering as Ive noted a number of times the very solid pricing power that we have due to the high quality of our journal portfolio. So I wouldn't say that the tough times are over for universities and I think were.
He knows the continue to work with them affirmatively like we did last year. When we went out with a zero percent price increase that's going through our P&L. This year zero percent price increase and certainly certain institutions where research is.
Somehow less essential it might've been a little bit of a little bit more pressure, but overall.
Our customer base and the renewal rates are extremely high both on a gross and a net basis. So we're very pleased with where we're coming out of this and of course as we move forward.
It's all about the quality and the volume of our publishing program, which both undergirds, our traditional subscription business and fuels the growth engine that OE has.
And a half for us.
And that's great color and switching gears to academic and professional learning.
What kind of assumption.
Our projection and we are making for our future.
Just sort of isolate textbook portion of the business in terms of the guide and.
How much of a rebound.
Become buffer, you're you're experiencing and corporate and professional learning you you touched on it but any more color there would be great.
Sure sure.
So.
We have had.
The.
Academic content business, which is sort of rightly referred to as the textbook business.
And where we can has been in a period of transition for a long time, but it really is no longer the textbook business.
Really the digital content and courseware business now, we're well over 50% of our of our of our revenue comes from digital units and it's important to note.
We are seeing.
Africans growth in our digital units.
Seeing growth in our digital revenues and we'll continue to see some pressure in the in the print parts of the business.
Which we never expect or at least not for the next few years to go away completely but the but the uptake that we've seen in the digital.
Content, and courseware, which which is becoming the norm, it's becoming a standard and this last year just prove that.
Because it not only force people to go digital and actually prove to them. The value of these of these powerful digital interactive personalized product, where you can measure impact.
And you can learn wherever and wherever you want and I guess, it's a long winded way of saying, we like the future of that business.
And and we like.
Because the the high quality content that we produce is absolutely essential to what they what they do and it has been proven over and over again, so now that we're through the transition.
We expect the business behaves like a like a modest a modest low to modest growth business and to be nice and profitable on the way.
Does that address your question indeed on that part of it on and Lucas corporate partner.
Yes, absolutely and maybe corporate reopening and.
And as Covid abates.
Yeah, So corporate is on.
Is is an interesting dynamic there is an interesting set of dynamics going on and corporate and it's really driven more by.
The skill gap and by the need to to get seems to be highly functioning and to get individuals to.
To be high performing and what we what we saw on the last year was with Super interesting.
We had a business. So we have a business that supports supports in person training very directly as you know and needless to say without any in person and that we've known person and training, but what happened during the pandemic was quite fascinating in.
And that and that there was a dramatic shift toward the virtualization of those in person training and at this point well over 80% of our training remain virtual even as we're going back because again people have realized this is what we mean by when we say the trends are pulled forward. They were trends. They were pulled forward and now people are realizing wow I can touch more.
More people have a more regular interaction more regular training upskilling as part of my day to day job. So that has come back quite quite nicely, even as the in person and part of it has continued to be it's growing quite well, but it.
And it's growing well compared with Covid low.
But we are seeing this virtual.
Aspect to it.
And the digital aspect to it adding significant more.
And if you will because they are because now I can make learning part of more people's lives and they're in their jobs and and do that throughout the year as opposed to just on single days, where we're having and personal training. So it's starting to come back it's not yet back at 100% that part.
Of the business, but overall.
This segment is an essential part of the economy that we're positioned very well too.
Well to participate in.
Your next question comes from the line of Greg <unk> with Sidoti Your line is open.
Hey, guys. Thanks for taking my questions.
I wanted to make sure I understood.
That correctly when you said the trend is pulled forward, but for the education and <unk>.
Publishing and professional learning segment is it fair to say that the low single digit guidance the cadence throughout the year, we will probably be front end weighted just because of the test prep trends.
During COVID-19 is that correct.
Non 100% I understood. The question, what we're seeing and the and the tests go ahead. If you want to clarify on yes, low single digit guidance for that division I'm, assuming it's going to be free.
And weighted the revenues will be higher.
And the first half just given the trends during COVID-19 kind of pushed a lot of test prep out.
Is that fair.
Ah.
Right.
And I understand the future of the businesses that were most affected by Covid test prep is 1 of them and our in person training corporate training businesses.
The other.
We will we will our recovery will be a direct function of the recovery of those sectors.
Touched on the in person corporate training piece to say that it's growing nicely back from prior year's levels.
Both within the traditional fees, where we're getting back to our pre pandemic levels.
And also in the more new digital opportunities that are created by it and those will develop over time. So yes, we recover there youll see youll see a direct function of that recovery show through and our growth rates are compared to the year on year bad periods and test prep and the same dynamic holds but it is a little less.
Clear.
It's a little less clear how that how and when thats coming back because we still don't have full scale resumption of Av testing and the delivery of test and test prep centers as that comes back we will we will track with it.
And we're not going to predict that on a on an individual product line basis here.
We obviously believe it is going to come back and it is coming back at some level, but we will track that and where we don't have pure visibility into into when that's going to happen because it's a function of Av.
Health conditions and things outside of our control.
Understood. That's very helpful. And then I just wanted to.
And dig into just the.
What was it.
Education editor capacity that kind of ramped up and the research Division can you just give us a little bit of color on that because it seems like you have some positive moving parts, but the 40% EBITDA of the Hendawi acquisition coming in so can you maybe.
Give us a little bit of color on how to think about that and is it going to continue throughout 2022.
Yeah, absolutely so.
I can give you color on that and John Ken can add to the answer that I will give you with that with some color if he feels like there's more to add.
So yeah, we saw unprecedented surge in demand.
From the very beginning of the pandemic from what were already pretty high levels of demand the demand and the research business.
Presents itself and the form of increased submissions and the requirement to evaluate those submissions and process.
That's them through the through.
Through the pipeline.
And a significant portion of our.
On the investment was keeping up with that demand.
Naturally what you want to see is what we're doing which is we're investing heavily in the autumn and date automate and streamline those processes. So while now we.
Brought on.
Significant capacity in order to meet that demand and the long run and you should see and expect to see increased productivity.
We processed that price pipeline and a more streamlined and automated fashion.
We saw growth opportunity, we did what we needed to do to capitalize on it and Thats what it comes down.
Now on the longer runs and we are adapting and people now, but and the long run we're investing in automation and streamlining of processes in order to make sure that the debt the profitability translates straight through.
Although directly through excuse me the revenue translates more directly through the profitability and the Hendawi acquisition.
And as you rightly note.
And <unk>.
Is a net contributor to our profitability because they have pioneered some very efficient streamlined processes through and and great systems for processing increased volume of open access articles.
John is there anything you would add to that yes.
Yes, I just would add Greg when you're looking at.
On to fourth quarter results.
And I'm sure you already see the.
And the EBITDA margin that is significantly driven by the item I mentioned with respect to <unk>.
Annual incentive compensation and it being above target and in the fourth quarter.
Net significantly weighing on.
The results and the quarter so.
We expect to head back and the direction of our trend line around EBITDA margin and that business. The fourth quarter was again significantly impacted by incentive compensation.
Got it got it and then just just 1 final 1 the real estate the $8 million and.
On recent I think run rate savings has that started in this quarter or is that going to take a little bit of time until it starts to work.
It's well.
Greg we're underway there we've been running last couple of quarters about call it around $2 million a quarter and savings.
Okay, perfect alright, well, thanks a lot.
That's all I got.
Great. Thank you.
And we have a follow up question from Daniel Moore with CJS Securities. Your line is open.
Thank you again, so I just wanted to get to the profitability portion of the guide so on a go forward basis.
Yes.
EBITDA and EPS guidance implies fairly modest incremental margins you laid out and detail, obviously incremental investments and research as well as <unk> is there any way to quantify.
Each of those to get a little bit better sense.
For the magnitude of each.
And then secondly, 10.
Got it.
And I believe we expect it to be accretive by fiscal 'twenty 3 on a GAAP basis.
What kind of dilution or are we looking at for fiscal 'twenty 2 from $1.
Sure So EPS.
Sure. So let me first respond to your comments overall about flow through on.
Ability. So we are investing substantially both in research and and education services Alright. So its not just research, but we see we see important opportunities for strategic revenue growth across the business, but we're close to significantly we are investing in research and and education.
And in services.
And then along with debt, we do see some pressure on TNT.
On call it single digit millions of dollars because we are going to ease our way back into this but we are going to get back into a more and personal and business activity environment and that will drive some spending not only around around travel, but also around hosting some investor that add value to the business.
So we'll see a combination of factors there I do also want to call out significantly.
Impacting our growth and EPS that we do have higher depreciation and amortization associated with investments and acquisitions and we are anticipating and increase in our effective tax rate from.
<unk> was roughly 20.
5% in fiscal year, 'twenty, 1 to something that will be and the 22% to 23% sort of range so somewhere in that direction.
With regard to hinder we had said that and value would be about 15.
What Lulu to EPS and our fiscal year 'twenty, 1 and that's about where we ended up we expect that.
Debt level of dilution will decline significantly in fiscal 'twenty, 2 and then b.
Accretive to our earnings in fiscal 'twenty, 3 as we said before from a from an EBITDA and cash flow percentage.
So good, though hendawi will be significantly accretive to Wiley and fiscal year 'twenty..2 so we're on we're on the track we had expected.
Very helpful and I'm going to take a quick stab probably not but fascinated by the automation.
Sutton.
And the investments that you're making.
Longer term any kind of margin benefit that you might be willing to discuss or is it a little early or premature for that.
But then earlier.
No you could you could take and go ahead John.
Yes.
And it's going to say.
We're making these investments.
And then.
With the expectation that they will both improve our topline growth again, we see some really strong opportunities and they're reflected already in our top line growth projections for for fiscal 'twenty, 2 but we certainly also expect to drive efficiency.
And again I would say most notably as Brian commented on the on the research side, where we're going to drive process efficiency and automation and research that will help us grow rapidly in open access, while managing and associated costs with that and improving our margin over time. So there is some work.
And John but yes, we do expect that these investments are going to improve our margins along with revenue.
Yeah, Dan So what I wanted to to.
Add to that is.
We are on a long term path to.
To 2 things 1 is to take.
Mark debuted nature of the opportunities that exist in the marketplace today.
And this gets to your gets to your earlier question as well.
And these opportunities exist and research they exist across all of our segments. As you know we feel very good about where our where our markets are going.
But we're also investing and making these.
<unk> advantage is Mrs and the good thing is the 2 things go together and almost every case the 2 things go together and then.
We'll do a litany of how I'll just give you 1 or 2 examples.
And if we continue our investment.
Apart from the short term investment I talked about earlier in terms of capitalizing on short term opportunity.
And batteries demand opportunities.
And as we invest in the automation.
Our research publishing processes, a number of really good things happen.
The first thing that happens is obvious right, we sort of move from manual processes to digital and automated.
<unk> and AI driven processes that is good but there's a lot of stuff that goes along with that.
On the investment in that automation also makes the process by definition faster.
Is what the market wants it also what we want because we get to put more through the system. It also allows us to move we've talked about the.
And if the Cascade and the importance of being able to find a publishing home in our 7 and our.
1900 journals.
And all high quality research that deserves to be published and automation allows us.
And take a number that's published today and sort of call. It a quarter of our articles that we published.
Tissue and move that up incrementally, while maintaining quality because now we have the ability to not just sort them efficiently and process them efficiently and and edit them efficiently and produce them efficiently, but also to in.
And automated also and manual ways, but and automated ways to get them as quickly as we can to a home inside the portfolio.
Today, and it sounds like an easy thing to do but it's actually quite hard and my point is that we are investing significantly and that's in the in the processes and and the infrastructure in order to make sure that the business gets better.
And more profitable at the same time and even better for the customers better for US and also generate profitability. This is why we're confident and not just.
Topline outlook as we pivot towards growth, but by pivoting toward growth. We're also improving the bottom line outlook and I.
And I hope that's cleared and.
Yes, and that's very helpful and as I said at the outset.
Trajectory.
And this is really encouraging so I appreciate the color and maturity here and more.
Great. Thank you.
Thanks, Dan.
Alright, no further question.
I'll now hand, the call back to the company.
Great.
I want to thank you all for joining our call today, and we will look forward to sharing our first quarter results and setup.
Mark I want you all to note that our Investor Day is now scheduled for Friday October 29.
We'll be a virtual investor day, and please reach out to Brian Campbell for more details and we'll look forward to seeing you then.
Thanks, everybody.
Thanks, everyone.
Thank you and thoughtful includes.
September conference. Thank you all for joining you may now disconnect.
Okay.
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Today's.
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