Q4 2021 John Wiley & Sons Inc Earnings Call
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Good day, and thank you for standing by working through the wildly fourth quarter and full year 2021 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the session.
Perhaps par 1 on your telephone if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Mr. Applying Campbell Vice President Investor Relations. Please go ahead.
Thank you Jerome.
Hello, everyone and thank you for joining us with me.
<unk> are Brian <unk>, President and Chief Executive Officer, and John Gritzmacher, Chief Financial Officer.
For your reminders to start the call is being recorded on May include forward looking statements you Shouldnt 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 obligation to update or revise.
You will need we're looking statements to reflect subsequent events or circumstances.
Also Wiley provides non-GAAP measures as a supplement to evaluate underlying operating profitability and performance trends.
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 reviewed as alternatives.
<unk> measures under GAAP on that day.
Otherwise noted we will refer to non-GAAP metrics on the call and variances are on a year over year basis and will exclude the impact of currency.
After the call a copy of this presentation and playback on the webcast will be available on our new Investor Relations webpage, I'll now turn the call over to Wiley as President and CEO, Brian <unk>.
Well good morning, everyone and thanks for joining us on it.
Start by acknowledging our colleagues customers and partners in India, Sri Lanka in 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 held.
Non WIC and social challenges continue to remind us.
Wiley of the importance of what we do.
We enabled scientific and medical discovery, we power education, and we shaped the work force the tomorrow.
Through our work Wiley as a business is committed to unlocking human potential, which we need now more than.
That fiscal 'twenty, 1 was a good year for wireless.
Consistent strategic focus on open research and career connected education paid off and we saw strong financial performance and increasing momentum.
Our markets began to emerge from a 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 will look like and strengthening our growth outlook.
Why is that your 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 customers during a time of great need.
While continuing to drive our strategy forward and improve our operations, notably.
<unk> our colleague engagement worldwide has risen significantly during this period.
1 reason for the high engagement as our People's deep belief in the unique impact that they have on society year end and year out.
The more researches and learners, we help to succeed the greater the impact and there was a lot of opportunity for impact this year.
Overall fiscal 'twenty, 1 was 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 researching 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.
Here the shift toward open research the migration toward online and hybrid education in both University and corporate settings, 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 open research where revenue.
It was a direct function of the quantity of articles published in the price we charge.
We realized significant volume gains in fiscal 'twenty, 1 based on the quality and breadth of our journals and on the excellent performance of our strategic read and publish agreements.
These volume gains are driving double digit OE revenue growth.
The demand for online degrees and credentials accelerated significantly through the year pacing by the pandemic as it did Wiley network of leading universities and corporate partners enabled learners to improve their career prospects through education. Consequently, enrolment was up significantly.
Wiley has.
<unk> long been a strategic partner for both universities and corporations and our services were in high demand as institutions plan for their their hybrid futures.
This move to digital education also drove an accelerated shift toward digital curriculum.
Our volumes were up significantly as digital courseware products, such as the highly effective zibell.
<unk> line.
Emerged as the preferred learning tool set in today's world of anytime anywhere education.
<unk> is a leader in digital courseware, and we continue to realize significant growth in adoption and usage.
As the market goes increasingly non traditional new opportunities are opening up for companies like Wiley that can deliver for learners.
And whenever they choose to learn.
At Wiley, we are highly motivated by our environmental and social responsibilities, both on our core lines of business and as a global corporate citizen in.
In February we signed the UN global compact a pledge to drive business action in support of achieving.
<unk> specific sustainable development goals by 2030.
As a company committed to research and education, while these growth strategies themselves have impact and our success leads to ever greater societal benefit.
For example, the rapid growth of open research output means that more cutting edge knowledges.
Ever being delivered to the world faster and more openly so it can have more impact.
The same can be said for our work in education, where the growing reach of our career connected offerings leads directly to unlocking career potential for millions of learners, many of whom would not have otherwise had access to the opportunity.
Across Wiley, we're always looking.
<unk> ways to increase access and lower costs for those most in need.
1 example is our long time partnership with research for life through which we provide free or low cost access to our content in developing countries more broadly Wiley has worked to ensure a vibrant research ecosystem directly advances the UN sustainable development.
Goals in 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 we've been doing to delivering faster and more targeted career credentials to extending our footprint in underserved markets.
Our <unk> technology.
Looking for career program in India for example targets at risk populations such as candidates for the first in their families to access higher education.
And it targets those from households, earning less than $500 a month.
Notably over half of our candidates for credentials in India are women.
By actively targeting impacted.
Packed in this way Wiley is helping to fulfill UN sustainable development goals for quality education and reduced in 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 a predominantly digital company we will continue.
Knowledge of reductions in our carbon emissions by reducing the companys production of printed products, such as books and journals and by pursuing a broad green plan.
During the year I sign the CEO action for diversity and inclusion.
<unk> action as a significant commitment to sustained concrete action that advances.
To draw thinking behavior and business practices in the workplace.
While we also proudly received an a grade in the MSCI ESG ratings report and a perfect score from the human rights Foundation for LGBTQ workplace equality.
At an industry level.
<unk> is the chairman of the association of American Publishers, I am personally advancing too ambitious initiatives industry wide, 1 on sustainability and the other on the Eni.
While we will continue to drive impact both as an enabler of discovery and learning and through corporate responsibility across our global.
<unk> footprint.
Now I'll review review our results for the quarter and then for the year.
The team delivered another quarter of strong execution and performance revenue rose by 10% adjusted EBITDA by 21% and EPS adjusted EPS by 41%.
<unk> research revenue for the quarter was up 9%, 4% organically driven by continued momentum in open access corporate solutions and research platforms.
APL grew 12% largely by strong demand for content and courseware across both education publishing and professional learning.
This growth was helped by an accelerating recovery in corporate training.
Education services rose, 7% driven by growth in degree program enrollment.
And 3 job placements.
Earnings growth was largely fueled by strong profit performance in APL and Ed services.
Driven by both revenue growth and significant cost structure improvements.
This offset a decline in research due to investments in editorial capacity to 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 up 27% free.
Free cash flow for the year was up 48% to a historical high of $257 million.
As you can see it was a.
<unk> share, 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 presentation.
I'll now turn to our segment performance.
Wiley research delivered another strong year with revenue up 5%.
<unk> for 3% organically.
This was fueled by consistent execution of our strategy to take advantage of the increasing global demand for published and to access research 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 in our OE revenue.
So a growth more than offset 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 transit.
Kunal agreements.
Continue to contribute to robust growth in publishing volume.
During fiscal 'twenty, 1 we signed multiyear agreements with consortia in Italy, Ireland, Spain and Switzerland.
Hendawi the innovative OE publisher, we acquired in December is already adding significant value.
As we integrate its fast growing collection of 200 journals.
As noted we anticipate significant revenue synergies from the expansion of our journal portfolio and by offering a broader range of platforms and services to our existing society and publishing partners.
We are well along in the integration of Hendawi.
And it is going very well.
Wiley Research is also seeing continued strong momentum from our platforms corporate solutions and society publishing clients.
Of note is the success, we're seeing in the career centers that we manage for corporate and Society partners.
We recently signed.
Up Glaxo Smithkline and Pfizer among others.
We're also seeing continued success in the addition of New Society publishing business with net wins for calendar year, 'twenty, 1 worth over $10 million annually.
[laughter].
Other noteworthy other noteworthy developments and research from the past.
Last year include the following.
In just 12 months litter atom usage grew by 31% to $4.6 billion user sessions, while the platform maintained at 98% client retention rate.
We are increasingly leveraging our broad product offering and publishing and platforms to build expansive new partnerships with major.
Commodity such as the Chinese Medical Association publishing House, and the American Association for the Advancement of science of the AAA us.
During the year, we continue to build our proprietary journal portfolio, including launching a major new flagship journal called Natural Sciences, which we created in partnership.
<unk> sequential project deal consortium out of Germany, We're very excited about the potential of this journal.
Internally, it's critical that we don't take our eye off the optimization ball through fiscal 'twenty..1 we continued to make significant gains in the efficiency of our publishing operations, while supporting our unprecedented volume growth.
With him over the past few years.
While it took a strong position.
To stand as a strong ally to the evolving research 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 put the researcher first.
The result has been a steady upward revenue trajectory from 2% organic in fiscal 'twenty to a mid single growth outlook for fiscal 'twenty 2.
From where we sit market trends remained favorable.
Scientific research investment and output continue to grow nicely and research has.
Suddenly integrated into both corporate strategy and government policy around the world.
On important macro indicator global R&D spending is forecast to rise by 5% in calendar 'twenty 1.
Demand for published peer reviewed research will continue to be very strong and access to that research essential.
Looking forward.
Increasingly is in a great position to meet the growing needs of the global research ecosystem.
Now on to academic and professional 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 publisher.
Publishing platform favorable market dynamics, and consistent customer centric strategies, which include the multiyear build 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 for.
The impact of Covid, driven by strong momentum in our professional publishing program.
And by the continuing recovery of corporate training.
That said Covid was highly disruptive to in person corporate training and test prep and we had to navigate through that for.
For the year APL revenue was down 2%, although the fourth quarter saw a growth in 12.
5% compared to the Covid impacted fourth quarter of last year.
Adjusted EBITDA for accelerated in the second half of the year driven by revenue performance and gains from optimization, we finished up 4% at our full year EBITDA margin of 25%.
Other APL highlights.
The year include the following.
Our Wiley plus platform recorded 1 million Activations for the first time and revenue from our XI books program increased by over 50%.
Now with over 400000 subscribers.
We launched a partnership with southern New Hampshire University, the largest nonprofit provide.
Lights from higher education in the United States with 175000 students.
Together, we are redesigning their MBA program to allow the owners to complete their degree in 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.
<unk> event.
Great services, and leading edge innovation.
Finally, I'm happy to say that our 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.
Right deliberate in our strategies 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 in the system.
So we expect to have a better view of enrollment as we get closer to the start of the school year 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 in both academic and corporate settings for.
<unk> and students alike.
<unk> for now beyond the tipping point in a readily adopting and implementing fairly price digital programs to support their learning journeys.
Corporate leaders are increasingly focused on real time development of their teams to fill skill gaps.
Which is similarly, driving demand for digital content on platforms.
All of this bodes well.
For our API offerings as the labor market drives an increasing need for wireless career connected content and services.
Fiscal 'twenty 1 was also a good year for our Ed services segment with Covid as a contributor to online enrollment for.
For the year revenue rose, 21%, 7% organically.
Powered by 14% growth in student enrollment and 20% growth in new student starts.
Adjusted EBITDA more than doubled this year as our focus on optimizing the student journey from lead the graduation began to pay off.
We finished with a full year EBITDA margin of 18% up from 9% last year.
Beyond our strong financial.
<unk> performance, we saw a number of other notable achievements during the year.
The team signed 8 full service institutional partners partnerships, including the University of Montana, Latrobe University in Australia, Tel Aviv University in Israel, and this quarter Norwich University in Vermont.
We also added important partnerships for unbundled services.
Services, with New York University, and the University of Wyoming.
Building the online catalogs of our existing partners is always a top priority.
And we added over 40, new degree programs at existing partner schools in areas ranging from business in health care to computer science and public administration.
Despite COVID-19 headwinds in the early stages of the pandemic, we gained momentum with <unk> III.
Through the year as corporate demand for tech talent accelerated.
In the fourth quarter, we signed for major global corporations. Following 3 that we signed in 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 the needs of these needs by building a.
A solid foundation for durable profitable growth and net services.
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're doing we've raised our EBIT margin from 3% in fiscal 19% to 18% in 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 'twenty 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 remains strong for academic credentials as students and professionals look to differentiate themselves in a competitive labor market.
This will include increasing demand for new forms of targeted credentials that are quicker to get more affordable and that gives workers the precise skill.
They need to succeed.
The pandemic has only accelerated the 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 in creating the 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 the wildly team has made significant progress in refining and executing our growth strategies, while also driving important gains in operational efficiency and effectiveness.
Our improved revenue and profitability in fiscal year 2021 is clear evidence of our strong momentum.
Following an extended period of limited revenue growth, we now anticipate organic revenue growth of 5% or more in the coming year.
We will continue to invest.
And best in the expanding opportunities in our markets and research we will publish more to meet global demand leveraging hendawi to drive open access revenue synergies and we will go broader with publishing and platform offerings for societies incorporations.
And career connected education, we will continue to expand our online.
Free programs and drive online enrollment scale, our digital courseware portfolio and expands the I T talent development pipeline, along with our base of corporate clients.
Finally in our relentless pursuit of operational excellence, we will continue to expand publishing capacity in workflow automation.
<unk> drive student acquisition improvements and enhance our direct to consumer capabilities, including our E Commerce experience.
Looking ahead now to fiscal 'twenty 2 total Wiley revenue is expected to exceed $2 billion for the first time in our history growing by mid to high single digits.
On line to go a range of 2.07% to $2.1 billion.
For the year, we anticipate revenue growth in all 3 segments, including mid to high single digit growth for research low.
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 revenue tempered by investments to accelerate growth in 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 $3.5.
Reflecting higher depreciation and amortization expense related to investments and acquisitions.
Along with a higher effective tax rate.
Capital expenditures, including technology property and equipment.
In product development spending are expected to range between 120 and $130 million compared to $103 million in fiscal 'twenty, 1 as we invest in the previously noted growth initiatives.
While these free cash flow generation will remain strong, although we will continue to see some.
On variances from year to year.
Wiley generated $173 million of free cash flow in fiscal 'twenty and $257 million in fiscal 'twenty 1.
Fiscal 'twenty, 1 performance was driven by strong cash earnings lower Capex and a $21 million.
Exact related tax refunds reported in Q2 and received in Q3.
Looking ahead to 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 net cash taxes in fiscal 'twenty, 2 due to the cares act related tax refund received in fiscal 'twenty 1.
And higher annual incentive compensation payments to be issued in the first quarter of.
A fiscal 'twenty 2 for above target performance in fiscal 'twenty 1.
Our strong balance sheet and cash flows over time enable us to confidently invest acquire and return cash to shareholders as.
As previously noted fiscal 'twenty, 1 free cash flow of 257 million.
Ours was 48% higher than the prior year.
Capex was $103 million for the year $12 million lower than the prior year due to delayed investment in the early days of Covid.
As a reminder, we acquired OE publisher Hendawi this year for 298 million.
As we noted at the time of acquisition and Dow has attractive financial profile includes strong double 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.
Spirit to 1.6 last year.
Our strong cash flow for the year complements our healthy balance sheet with more than $90 million of cash on hand, and undrawn revolving credit capacity in excess of $660 million at year end.
Approximately 30% of our free cash flow was.
Competed for the dividend this year and the dividend was raised for the 27th consecutive year.
Our current dividend yield is a little over 2%.
And finally share repurchases were lower due to cash conservation in 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.
Notwithstanding the reduced level of share repurchases. This year Wiley 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.
Yes.
Thanks, John.
Let me quickly summarize the key takeaways before I open it up for Q&A.
Fiscal 'twenty 1 was a good year overall for Wiley is our growth strategies and open research and career connected education took firmly.
These.
These growth strategies continue to benefit from long term market trends, which had been pulled forward significantly in the past year.
So despite COVID-19 related headwinds these strategies and favorable market dynamics drove strong performance and increasing momentum across the company.
We expect long term opportunity to expand in Openreach.
On research online education and digital curriculum.
Nonetheless, we must remain focused and vigilant as we step forward into the uncharted post pandemic world.
That said, we planed fundamentally good markets and at our core Wiley remains a very strong company with exceptional brands, a solid financial position and powerful growth engines.
It doesn't impact company, we're powering discovery and learning worldwide and through this unlocking human 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 our millions and millions of learners and researchers around the globe.
In closing.
I want to thank our wonderful Wiley colleagues for their truly remarkable accomplishments this past year.
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.
I'm very proud to work with each and every 1 of them I will now open the floor to any comments and questions.
Okay.
That's the only minor if he would like to ask for questions. Please press Star then the number 1 on your telephone keypad and he feels like do we draw on your question for the pound cake for pause for just a moment.
On the compiled leukemia and foster.
Okay.
Your first question comes from Daniel Moore with CJS Securities. Your line is open you may ask a question.
Brian John Good morning, Thanks for the color on thanks.
For taking the questions.
Good morning.
Start with the obviously the top line outlook is really encouraging John.
Really across the board to 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 universities from.
It seems to be abating is that correct.
And second are you seeing as the increase largely from open access accelerating and then I have a quick follow up on publishing as well.
Yeah.
Absolutely.
It's a great question.
Ultimately our future as defined by the us.
Defined by the health of our of our.
Publishing programs and the balance between that.
Subscription businesses are.
I would not say that the pricing pressure has abated because the university ecosystem worldwide.
Covid continue to be under significant financial pressure.
Having said that what the last year has demonstrated is that our on.
Our research or high quality essential content.
Or something that librarians and universities are simply not willing to go without.
So we expect to see.
See some continued financial pressure, but but again, what we've said many times is that that pressure will.
It 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 in with submissions up in the you know in the.
In the upwards of 20% and output up in the in the mid mid teens and as that happens we move as you know to a P times Q environment that continues to drive revenue growth in 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 we're going to have to 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 is somehow less essential there might've been a little bit of a little bit more pressure, but overall, our customer base on the renewal rates are extremely high both on a gross on a net basis. So we're very pleased with the with where we're coming out of this and of course as we move forward, it's all about the quality and.
Volume of our publishing program, which both Undergirds, our traditional subscription business and fuels the growth engine that OE has become for us.
That's great color on switching gears to academic and professional learning.
What kind of assumption.
We are.
Projections that we're making.
In the zone for.
If you just sort of isolate textbook portion of the business in terms of the guide and.
How much of a rebound of recovery are you experiencing in corporate and professional learning you you touched on it but any more color there would be great.
Sure sure.
So are.
We have had a day.
Making the.
Academic content business, which is sort of rightly referred to as the textbook business has.
<unk> has been in a period of transition for a long time, but it really is no longer the textbook business. It really is the digital content and courseware business now, we're well over 50% of.
<unk> of our of our revenue comes from digital units and it's important to note.
We are seeing significant growth in our digital units, we're seeing growth in our digital revenues and we'll continue to see some pressure in the in the print parts of the business.
What.
Our expected or at least not for the next few years to go away completely but.
But the uptake that we've seen in the digital content, and courseware, which which is becoming the norm, it's becoming the standard in this last year just prove that.
Because it not only force people to go digital and actually proved to them the value.
Of these of these powerful digital interactive personalized products, where you can measure impact and you can learn wherever wherever you want I guess, it's a long winded way of saying, we like the future of that business.
And we like.
Cause 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 to behave 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.
On that part of it on Lucas' corporate partner.
Yes, absolutely and maybe corporate reopening.
As Covid abates.
Yeah, So corporate is.
Is a is an interesting dynamic there is an interesting set of dynamics going on in corporate and it's really driven more by.
The skill gap and by the need to get seems to be highly functioning and to get individuals to be high highly performing and what we what we saw on the last year was super interesting.
We had a business that we have a business that supports <unk>.
<unk> in person training very directly as you know and needless.
To say without any in person there with no in person training, but what happened during the pandemic was was quite fascinating in 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 trainings 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 in how people are realizing wow I can touch 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 part of it has continued to be it is growing quite well.
Well, but.
It's growing well compared with Covid lows.
But we are seeing this virtual.
Aspect to it and the digital aspect to it adding significant more Tam if you will because they are because now I can make learning part of more people's lives in their in their jobs and and.
Do that throughout the year.
As opposed to just on single days, where I have in person 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 to well.
Well to participate in.
Your next question comes from the line of.
Greg <unk> with Sidoti.
<unk> 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.
Publishing and professional learning segment is it fair to say that the low single digit guidance.
Since the cadence throughout the year will probably be front end weighted just because of the test prep trends during COVID-19 is that correct.
I'm not 100% I understood. The question the what we're seeing in the in the tests go ahead, if you want on clarifying, yes, low single digit guidance.
For that division I'm, assuming it's going to be front end weighted the revenues will be higher in the first half just given the trends during COVID-19 kind of pushed a lot of test prep out.
Is that fair.
Right.
I understand the future of the business.
<unk> that were most affected by Covid test prep is 1 of them and our in person training corporate training businesses was the other.
We will we will see our recovery will be a direct function of the recovery of those sectors I've just touched on the in person corporate training piece to say that it is growing nicely back from prior.
Prior year's levels.
Both within the traditional piece, where we're getting back to 2.2 our pre pandemic levels and also in the more new digital opportunities that are created by it and those will develop over time. So yeah. As we recover there youll see youll see a direct function of that recovery show through on our growth.
Both rates compared to the year on year that periods in test prep for the same dynamic holds but it's a little less clear.
It's a little less clear how that how and when that's 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.
GAAP, we will we will track with it.
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 thats going to happen because it's a function of of.
Health conditions and things outside of our control.
Understood that's very helpful.
And then I just wanted to dig into <unk>.
Just the.
What was it.
Education editor capacity that kind of ramped up in 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 with 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 can.
Can add to the answer that I will give you with.
With some color if he feels like there is 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 in the research.
<unk>.
Presents itself in the form of increased submissions and the requirement to evaluate those submissions and process them through the.
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 as 8 automation and streamline those processes. So while now we brought on.
Significant capacity in order to meet that demand in the long run you should see and expect to see increased productivity.
As we process that price pipeline and a more streamlined and automated fashion.
Fashion.
We saw growth opportunity, we did what we needed to do to capitalize on it and that's what it comes down to now on the longer run we are investing in people now but in the long run we're investing in automation and the streamlining of processes in order to make sure that the.
That the profitability translates straight.
Omar directly through excuse me the revenue translates more directly through to profitability and the Hendawi acquisition you rightly note.
Is a.
Is a net contributor to our profitability because they have pioneered some very efficient streamline processes through and great systems for processing.
Increased volume of open access articles.
John is there anything you would add to that.
Yes, I just would add Greg when you're looking at the fourth quarter results, which I'm sure. You are you see the dip in the EBITDA margin that is significantly driven by the item I mentioned with respect to.
Annual incentive.
Through compensation and it being above target.
Fourth quarter.
Significantly weighing on research results in the quarter. So we expect to head back in the direction of our trend line around EBITDA margin in that business. The fourth quarter was again significantly impacted by incentive compensation.
Got it got it and then just just 1 final 1 on the real estate the $8 million and I think run rate savings has that started in this quarter or is that going to take a little bit of time till it starts stuff for <unk>.
It's well.
Greg we're underway there we've been running the last couple of quarters at about let's call.
On a $2 million a quarter in 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 I just wanted to get to.
For the profitability portion of the guide so on a go forward basis.
EBITDA and EPS guidance implies fairly modest incremental margins you laid out in detail, obviously incremental investments in research as well as T. Any is there any way to quantify.
Each of those to get a little bit.
A better sense.
For the magnitude of each and then secondly hendawi.
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 Hendawi.
Sure So EPS John.
Hum.
For sure. So let me first respond to your comments overall about flow through on profitability. So we are investing substantially both in research and in education services Alright. So its not just research, but we see we see important opportunities for strategic revenue growth.
Cost of the business, but with most significantly we are investing in research and in education services.
And then along with that we do see some pressure on TNT.
Call it single digit millions of dollars, because we're going to ease our way back into this but we are going to get back into a more in person business activity environment and that we.
We'll drive some spending not only around around travel, but also around hosting some investor that add value to the business.
So we will see a combination of factors there I do also want to call out significantly.
Impacting our growth in EPS is that we do have higher depreciation and amortization associated with investments.
The credit acquisitions, and we are anticipating an increase in our effective tax rate from what was roughly 20.
5% in fiscal year, 'twenty, 1 to something that will be in the 22% to 23%.
For the range, so somewhere in that direction.
With.
2 hendawi, we had said that hendawi would be about 15.
Dilutive to EPS in our fiscal year 'twenty, 1 and that's about where we ended up we expect that.
That level of dilution will decline significantly in fiscal 'twenty, 2 and then b.
Accretive.
Hard to earnings in fiscal 'twenty, 3 as we said before from a from an EBITDA and cash flow perspective, though.
We will be significantly accretive to Wiley in fiscal year 'twenty..2 so we're on we're on the track we had expected.
Very helpful.
I've 2.
I'm going to take a quick stab you know probably not but fascinated by the automation.
And the investments that you are making.
Longer term you know any kind of margin benefit that you might be willing to discuss or is it a little early or premature for that.
Well Dan.
<unk>.
Good Brian.
No you could you could take on a go ahead John.
Dan I was just going to say.
We're making these investments now and then.
With the expectation that they will both improve our top line growth again, we see some really strong opportunities and they are reflected.
Early in our topline growth projections for for fiscal 'twenty, 2 but we certainly also expect to drive efficiency gains I would say most notably as Brian commented on the on the research side, where we're going to we're going to drive process efficiency and automation and research that will help us grow rapidly in open access.
I'll read all managing the associated costs with that and improving our margin over time. So there's some work to be done, but yes. We do expect that these investments are going to improve our margin along with revenue.
Yeah, Dan So what I wanted to to add to that is.
On.
We are on a long.
1 path to.
To 2 things 1 is to take advantage of the opportunities that exist in the marketplace today.
And this gets to your guests to your earlier question as well.
And these opportunities exist in research they exist across all of our segments. As you know we feel very good.
Long term, where our where our markets are going.
But we're also investing in making these better businesses and the good thing is the 2 things go together in almost every case for 2 things go together.
And I won't do a litany of how I'll just give you 1 or 2 examples.
If we continue our investment.
Good about apart from the short term investment I talked about earlier in terms of capitalizing on short term opportunities demand opportunities.
As we invest in the automation.
Of our research publishing processes, a number of really good things happen.
The first thing that happens is odd.
Right, we sort of move from manual processes to digital and automated and AI driven processes and that's that's good but there's a lot of stuff that goes along with that.
The investment in that automation also makes the process by definition faster, which is what the market wants. It also what we want.
As we get to put more through the system. It also allows us to move we've talked about this issue of the Cascade and the importance of being able to find a publishing home in our 7 are on.
1900 journals for all high quality research that deserves to be published.
And automation allows us.
<unk> began to take a number that's published sort of call. It a quarter of our articles that we published today 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 edit them efficiently and produce them efficiently, but also to.
Automated.
Also in manual ways, but in automated ways to get them as quickly as we can to a home inside the portfolio, which sounds like an easy thing to do but it's actually quite hard my point is that we are investing significantly in this in the in the processes and the infrastructure in order to make sure that the business gets better.
And more profitable at the same time.
It's better for the customers better for US and also generates profitability. This is why we're confident in not just the top line outlook as we pivot towards growth, but by pivoting toward growth. We're also improving the bottom line outlook.
I hope that's clear dance.
Yeah, No that's very helpful and as I said at the outset of the.
You know trajectory.
Timing.
The business is really encouraging so I appreciate the color on majority here anymore.
Great. Thank you.
Thanks, Dan.
Alright, no further question.
I'll now hand, the call back for the company.
Great.
I want.
Thank you all for joining the call today.
And we will look forward to sharing our first quarter results in September.
Want you all to note that our Investor Day is now scheduled for Friday October 29.
It will be a virtual investor day, please reach out to Brian Campbell for more details on the look forward to seeing you on.
On a study.
Thanks, everyone.
Thank you and that concludes today's conference. Thank you all for joining you may now disconnect.
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