Q4 2022 John Wiley & Sons Inc Earnings Call
With talent development and professional learning.
On the profit side, adjusted EBITDA, and adjusted EPS Rose, 3% and 4% with revenue performance, partially offset by investments in growth and optimization initiatives, notably since fiscal 'twenty Wiley has executed its strategic plans very effectively allowing us to succeed through the Covid Lockdown period.
Net result is two year CAGR for revenue EPS and free cash flow of 7% 12.
<unk> and 14%.
That said as we know the macroeconomic environment is presenting uncertainty wildly in its markets tend to hold up well in economic downturns. Thanks to the essential nature of research and our role in it.
And thanks to the counter cyclical nature of higher education enrollment.
Nonetheless, we are watching conditions very closely carefully managing risk and keeping our powder dry to ensure that we can adapt to events as they unfold.
Let's take a look at how we executed on our stated plans. This past year at this time last year, we laid out for commitments for research. We said, we would publish more a simple statement, but that's what the world wants and that's what drives our success with.
We said, we would integrate and drive synergies from Hendawi, leading OE publisher, we acquired in fiscal 'twenty. One we said, we would scale the platform and service offerings for our partners and the research ecosystem.
And finally, we said we would increase the productivity and efficiency of our publishing operations.
I am pleased to report that we executed each of these four imperatives, well and the results speak for themselves, we published more growing article output by 7%.
While organic output was down from last year's 15% Covid induced Serge the two year trend line was positive compounding at 6% we.
We expect year over year organic output growth to resume in fiscal 'twenty three.
And now we performed at a very high level. This year delivering strong double digit organic revenue growth and 36% article output growth on a pro forma basis and has achieved this with exceptional margins we.
We have now completed the integration and we are benefiting significantly from Hendawi industry, leading open publishing practices and it's highly efficient systems.
As planned we scaled our research solutions business, we signed up 36, new partners, bringing us to over 450 <unk>.
<unk> and corporate customers, taking advantage of our broad range of essential research platforms and services.
We see lots of opportunity for Upselling and cross selling to increase lifetime customer value.
Critically 16% of our solutions customers now subscribed to more than one of our services and 4% to subscribe to more than two.
We are now seeing increasing LTV as we continue to expand our long standing client relationships.
Finally, we entered fiscal 'twenty, two with the intention of driving automation intelligence and efficiency across the research publishing process.
And we're making good progress across our most critical productivity metrics such as the referral rate of rejected articles from one Wiley journal to another and the reduction of the article cycle time from acceptance to publication, both of which benefit our researchers while delivering more revenue and profit to Wiley.
Notably over 50% of our rejected authors are now offered another widely option to publish this is up from 33% in fiscal 'twenty one.
This is facilitated by a highly automated intelligent process as you know Wiley does not publish 70% of the articles we received much of it due to improper fit with the journal to which it is first submitted capitalizing on this opportunity across our full 1900 journal portfolio will take time, but we're making very good progress.
So we are executing our plans and research and performing very well despite the world's uncertainties Wiley research remains a very strong business with a good growth trajectory strategic momentum and a recession tolerance profile science.
Scientific and technical research is driven by an ever increasing global R&D spend since 2000 through multiple recessions global R&D has more than tripled to $2 four trillion.
Now to the achievement of our fiscal 'twenty, two commitments and education.
As a reminder, demand for online education, and digital courseware with significantly amplified in fiscal 'twenty, one as COVID-19 drove record numbers of students into digital settings and.
In fiscal 'twenty, two there was a natural reversion in online enrollment. This snapback was accompanied by an unusually strong labor market that entice many students to forego school for opportunities in the workforce.
The net result was a challenging enrollment cycle across higher education.
A recent report.
Showed that total university enrollment was down over 4%. This spring after declining 3% in the fall. This variability weighed on our University services and education publishing lines, which saw declines this year of 1% and 4%.
Despite the challenge of this moment.
Our mid to long term outlook for higher education, and digital education in particular remains very positive. We study this market very closely and we see long term underlying growth in demand for online higher education digital curriculum, and importantly, corporate talent development, where we are expanding and we're enduring ski.
<unk> talent gaps will continue to drive growth.
Wiley is well prepared to capitalize on these significant opportunities due to the consistent execution of our strategic plans.
To that end, we made a set of commitments a year ago and education.
Where to expand online programs and drive online enrollment to expand student acquisition capabilities to scale digital content and courseware and to expand our corporate talent development relationships.
And University services, we signed up five full service partners in fiscal 'twenty two.
Offsetting three non renewing partners for total partner count of 68.
We also added 81, new degree and certification programs in high demand fields, such as business healthcare computer Science and engineering. This is far ahead of the 40 plus programs, we signed up in fiscal 'twenty, one and is well aligned with our disciplined approach to focusing on high demand careers and discipline.
And while enrollment slowed across the market wildly improved our ability to compete in the market for students by significantly expanding our proprietary student acquisition capabilities in short the ability to efficiently attract and enroll students is the defining capability that drives University success and this is their single big.
<unk> challenge.
The acquisition of Xyz media, a clear leader in student marketing made widely a leader in what matters most driving enrollment in this proprietary capability is now, allowing us to do so at a lower cost per student, thus driving both growth and profitability.
And education content and courseware, we saw healthy growth in digital content in <unk> courseware. Although these gains were offset by declines in print course material and courseware on legacy platforms.
<unk> continues to be a very good story for us with adoptions now in over 900 institutions revenue growth of 15%.
Wireless corporate talent development line had a huge year in fiscal 'twenty, two with record placements in over 70% revenue growth.
We signed 19, new global clients expanding into new industry verticals, such as technology and consumer goods.
And launched an upscaling program that will significantly increase the lifetime value of our clients.
Corporate talent development has become a major growth driver for Wiley.
Note that we recently branded our talent development platform from <unk> to wildly edge the name not only leverages. The strong wildly brand. It also says what we do for our partners and for emerging talent everywhere, we give them a meaningful edge in a hyper competitive world.
While it continues to drive real world impact to our core business activities in research and education, and we're always focused on increasing this impact in January 21, we signed the UN global compact a pledge to drive business action in support of achieving 17 UN sustainable development goals.
We continue to pursue these critical goals by simply doing what we do best enabling discovery powering education and shaping workforces.
Through our leadership in open research wildly as delivering more brand new knowledge to the world faster fulfilling many UN sustainable development goals, including good health and wellbeing and climate action.
In career connected education, we are actively improving access to high impact learning any good jobs in fact over 50% of our placement candidates in Canada U S and the UK now come from underrepresented populations.
In India. For example, we are delivering impact to at risk groups, such as those from households, earning less than $500 a month.
Nearly half of our career credential candidates in India are women.
In this way wildly as working to fulfill UN sustainable development goals for both quality education and reduced inequality.
We continue to make material progress in our corporate ESG efforts we.
We set out to be a carbon neutral certified company across our global operations again, this year and we achieved it.
More importantly, we are rapidly advancing towards science based targets, which will provide us with a clear route to reduce greenhouse gas emissions and our carbon footprint.
All of this is to say that it widely we take our commitment to positive impact very seriously and that we are making very good progress.
With that I'll pass the call over to Kristina to take you through our Q4 results our segment performance, our financial position and our outlook for fiscal 'twenty three.
Thank you, Brian and good morning, everyone.
I wanted to start by acknowledging the wildly team for delivering another solid year overall.
First let's talk about Q4.
Note that all variances exclude currency impact.
For the quarter slightly delivered revenue growth of 4% or 2% organic with continued momentum in research and corporate talent development.
This offset market driven declines in University services education publishing and professional publishing.
Adjusted EBITDA was flat to prior year and adjusted EPS was down 6%, mainly due to the revenue decline in academic and professional learning or APL and planned second half investments in key growth areas.
Before I dive into our market performance.
I want to comment on our current macroeconomic conditions and geopolitical uncertainties and how they relate to Wiley.
As a reminder, both Russia and Ukraine are very small markets for us.
So we do not expect any material revenue impact from the crisis.
While he does have a technology development center in Russia, one of several around the world and we've exercised contingency plans to ensure business continuity.
With regard to inflation.
I would expect wage pressure in fiscal year, 'twenty, three and some inflationary pressure on print publishing costs.
Both of which are reflected in our outlook.
In terms of other supply chain issues.
None have yet to be material and are largely digital nature of limits any significant impact.
As a reminder, physical products make up only about 17% of revenue.
We are also closely monitoring inflationary impacts on consumer spending which would impact more discretionary parts of our business such as professional books.
As Brian noted historically speaking Wiley has held up well through difficult economic periods.
This is because we are at the center of the global research ecosystem delivering must have content platforms.
And while we are currently working through enrollment challenges in general the education sector is countercyclical in times of market contraction.
Nonetheless in this period of economic uncertainty, we will be nimble prudent and highly disciplined to maximize our own thing.
Now onto our segment.
Note that beginning in Q1, we will be changing our research segment reporting to reflect both research publishing which will account for 85% of the segment and research solutions, which will account for 15%.
Research solutions will include platforms corporate solutions and services for societies and other publishers.
We will replace the current platforms reporting line for.
For the year research continues to deliver consistent revenue and profit growth with revenue up 9% or 5% organic and adjusted EBITDA up 10%.
Our EBITDA margin was 35% and is in line with prior year.
Performance was driven by solid growth in both publishing and solutions.
For the quarter revenue rose, 8% or 6% organic and adjusted EBITDA was up 12%.
In fiscal 'twenty, two stronger momentum continued for our transformation of Reed and published models with 27 major signings with large university consortia around the world.
As a reminder, these multiyear agreements we will continue to replace our legacy we'd only subscription deals which were eliminated from a growth perspective.
Brian discuss article output, so I won't repeat it here except to highlight that we expect to resume our historical trend line steady overall output growth in fiscal 'twenty three.
Finally research solutions continues to see strong demand for platform revenue was up 27% for the year or 8% organic and corporate solutions at 17%.
On the corporate side advertising career centers and spectral databases were all up 20% for the year.
In summary, we continue to see strong momentum across research.
This is reflected in our consistent operating performance and continued success of our profitable growth strategies.
On to APL.
Revenue in this segment was up 1% this year with growth in professional learning offsetting a decline in education publishing.
Adjusted EBITDA was up 10% due to revenue mix and lower employee costs for a full year EBIT margin of 28%.
That's up from 26% in the prior year.
For the quarter revenue and adjusted EBITDA were down, 5% and 3% mainly due to difficult market conditions.
Within this segment.
As discussed at publishing performance continued to be hindered by lower U S enrollments and unfavorable comparison to last year's digital content and courseware charge due to COVID-19.
The end result was at 4% decline in Ed publishing revenue.
Professional learning revenue was up 6% for the year driven by growth in corporate training and professional publishing.
I'm happy to report that corporate training has now fully recovered to pre COVID-19 levels and continues to show strong momentum in both virtual and in person delivery.
<unk> and double digit growth for the year and in the quarter.
This coupon growth for corporate training was offset by a professional publishing declined mainly due to an unfavorable comparison to prior year.
In summary, APL was up slightly for the year with.
With growth in professional learning, particularly corporate training offsetting market related challenges in education publishing.
In education services, we saw revenue growth of 14% for the year, driven by 72% growth and talent development.
This offset a modest decline for university of services, mainly due to the cyclical enrollment downswing.
As expected our investments to win new corporate clients and scale operations and talent development resulted in continued strong momentum, but also in adjusted EBIT decline of 26%.
For the year, our adjusted EBITDA margin was 12% compared to 18% in the prior period.
We have actively managed margins and university of services to be in line with our long term, 15% goal, but continued.
Investment in our fast growing talent development line is lowered segment profit over the near term.
Really solid plan to materially improve segment margins as we scale beyond fiscal year 'twenty three.
On the corporate side and 19 multinational clients, we signed this year, including top financial technology and consumer companies.
And I am pleased with the continued strength of our pipeline.
We grew tax placements of 112% inside of key global client for our Tech upscaling program involving hundreds of employees.
For the quarter talent development revenue was up 78%.
It had a lot of great momentum here.
On the University of services side online enrollment in our program was up 1% for the year, but down 5% in Q4.
And early read on our partner summer semester enrollment shows continued softness.
While we have confidence in our long term outlook of our digital higher education. It will take some time for enrollment to return to a more normal growth trajectory.
For the quarter University of services revenue declined 9%.
On a brighter note we are seeing improved business development pipeline of late.
<unk>, New full service partners added in Q4, including Ohio University.
Florida A&M.
<unk> University in Indiana, and Arcadia University in Pennsylvania.
In the quarter, we also signed University of Virginia, as a fee for service partner.
We have renewed American University, and we added 23 online degree programs.
In summary.
Growth continues to accelerate via corporate services as we are signing major clients and deliver record placements.
And University of services.
Cyclical enrollment challenges to work through but remain confident in the market and in our long term ability to deliver career connected education and credentialing programs that the market is demanding.
Steady cash generation remains a foundational strength of Wiley.
For the year free cash flow of $223 million exceeded our guidance, although it was down $34 million from the prior year.
This is largely due to onetime items, including a $21 million tax refunds and higher annual compensation payments for fiscal year 'twenty one outperformance.
Also contributing to the unfavorable variance was unusually low capex in fiscal year 'twenty, one due to COVID-19.
Cash from operations of $339 million was down $21 million from the prior year.
With regard to our balance sheet, our net debt to EBITDA ratio was one six at the end of April compared to $1 seven at the same time last year.
Liquidity continues to be steady with the $100 million of cash on hand, and undrawn credit capacity of more than $685 million.
With our consistent cash generation that we feel comfortable at these levels and <unk> acquisitions, we would expect to apply free cash flow after dividends and share repurchases to debt repayment.
Given the rising interest rate environment, maintaining a modest level of leverage continues to be a focus for us.
Note that we manage our exposure to fluctuations in interest rates using swap with $500 million of debt at fixed interest rates as of year end.
The weighted average interest rates on total debt outstanding in fiscal 'twenty, two with a little over 2%.
And we expect the weighted average interest rate on total debt to rise to a little over 3% in fiscal year 'twenty three.
Turning to capital allocation.
We continue to balance reinvestment in profitable growth drivers with targeted acquisitions in key growth areas and return to shareholders.
Yes.
Capex for the year was $13 million higher than in prior year, we saw lower spend due to COVID-19.
In fiscal 'twenty, two we invested in products and platforms and research talent development and digital courseware.
M&A total spend was materially lower this year than in fiscal 'twenty one.
That said, we did add critical capabilities and research solutions and University of services.
Going forward you can expect us to remain active but very targeted in our M&A strategy, focusing mainly on expanding our research journal portfolio research solutions offerings and corporate talent development capabilities.
On average about half of our free cash flow is returned to shareholders in the form of dividends and repurchases.
We are immensely proud of our 28 year record of consecutive dividend increases and our current yield is approximately two 6%.
Also in fiscal 'twenty, two we devoted $30 million to share repurchases.
From $16 million in the prior year.
We will continue to be opportunistic on this front with nearly $200 million remaining and current repurchase authorization.
On to operational excellence.
Brian and I as well as the rest of the leadership team are relentlessly focus on streamlining and simplifying our operations to improve efficiency in our cost structure.
To that end, we have already kicked off a targeted restructuring in fiscal 'twenty three.
And that combined with real estate optimization.
Result, in a Q1 charge of approximately 19% to $21 million.
Thus far the program has identified approximately 30% to $35 million of run rate savings with 20% to $25 million of it to be realized in fiscal 'twenty three.
These savings are reflected in our 'twenty three outlook and we will continue to identify additional opportunities throughout the year.
Also as I mentioned, we continue to rationalize our real estate footprint closing additional offices this quarter as they move to a more permanent hybrid work model.
Since spring of 'twenty, we have reduced our existing office footprint by 18%.
Also let me say that I believe there is further opportunity to improve our effectiveness through active portfolio management process reengineering and workflow automation.
It's too early to comment on these initiatives, but nonetheless critical to understand that we're firmly focused on one prioritizing investment in our most advantageous growth opportunities too.
To.
Driving operational excellence to the organization to remain resilient and nimble in an uncertain economy, and three driving future margin expansion through simplification and cost reduction.
Turning now to our fiscal 'twenty three outlook.
I want to first comment on foreign exchange, given the unusual and variance between our average fiscal 'twenty two rates, which is our base for constant currency and the current spot rates as of June 10th.
As you know about half of wireless revenue was generated outside the United States and therefore, our results are adversely impacted by the strengthening U S dollar, particularly in relation to the euro and the British pound.
Given the recent surge in the dollar exchange rate for the Euro for example has gone from 115 for our fiscal 'twenty two average to a current rate of one point <unk>.
Similarly, the British pound has gone from 136 to $1 two four.
This has resulted in a negative FX impact to our fiscal 'twenty outlook for revenue EBITDA, EPS and free cash flow of $75 million $25 million 30, and $25 million respectively.
In the table, we highlight this impact and provide both our outlook at constant currency and our outlook at the current spot rates to improve transparency.
Here I'll be speaking more to constant currency.
For revenue, while we anticipate mid single digit growth at constant currency driven by continued strong performance in research and corporate talent development as well as $19 million of inorganic revenue from fiscal 'twenty to acquisitions.
Adjusted EBITDA at constant currency is expected to be in a range of $425 million to $450 million compared to $433 million in fiscal 'twenty two.
Solid organic revenue growth will be partially offset by higher employee costs due to inflation and targeted investments in research publishing research solutions and corporate talent development.
Adjusted EPS at constant currency is expected to be in a range of $3 70.
To $4 five.
Down from $4 16 this year.
In addition to wage inflation and targeted investments, we are seeing higher interest expense higher tax expense and lower pension income.
These three items are expected to account for 35 of additional adverse impact in fiscal 'twenty three.
Note that Wiley adjusted effective tax rate is expected to rise from 20% this year between 22 and 23% in fiscal 'twenty three.
This is primarily due to a less favorable mix of earnings by country and an increase in the U K statutory rate.
Also note that fiscal 'twenty, two benefited from certain non recurring tax benefits.
In terms of the lower pension income it's important to note that our U S and UK pensions have been frozen since 2014, and 2015 and we are above 90% funded.
<unk> cash generation remains strong.
Free cash flow of constant currency is expected to be in a range of 210 and $235 million versus $223 million in fiscal 'twenty two.
Positive cash earnings and lower incentive payouts are expected to be offset by higher cash taxes interest and capex.
Capex of $115 million to $125 million compares to a $160 million this year.
Capital investment will be focused on platform and product development and research and corporate talent development.
<unk> build out of our digital commerce platforms and additional back office modernization.
Before I hand, it back to Brian I want to remind everyone that we changed our ticker symbol on April <unk> and W. L Y B, which is more closely aligned with our global wildly brands.
Back to you Brian .
Thanks Kristina.
Let me briefly summarize where we're headed in FY 'twenty three.
First we expect wildly solid revenue growth to continue driven mainly by strong market fundamentals and the tight fit of our business with the core demand trends in research and education, we have transformed the research business over the past few years, achieving growth, while driving strong margins and cash generation. We expect this to continue.
We also expect rapid growth continuing corporate talent development, driven by our ability to solve some of the corporate world biggest skill and talent gaps.
In academic education will navigate the current cyclical enrollment challenges, while watching for any slowdown in consumer spending which could impact some of our publishing lines.
We will continue to invest in both organic growth and seek strategic acquisitions, but will narrowly direct capital allocation toward our proven opportunities in areas such as our research publishing research solutions and corporate talent development lines.
As Kristina mentioned, we're significantly emphasizing operational excellence throughout wildly in FY 'twenty three.
Clear goal is to increase profitability and expand margins, while powering our growth strategy.
While always a focus of the current economic environment dictates that we elevate our productivity and efficiency to repeat our go forward objective is to invest in our proven strategies, while simplifying and streamlining Wiley.
By doing so we expect to continue our growth trajectory, while growing profitability beyond fiscal 'twenty three.
Building on this let me walk through our most critical priorities for fiscal 'twenty three and research.
We will continue to drive publishing output growth to meet growing global demand, we will transition more customers to our transformational read and publishing agreements. We will continue to expand research solutions actively signing new society, and corporate partnerships and cross selling our full offering to the growing wildly network.
And we will further optimize our research publishing operations lowering cost per article while increasing article conversion rates in education, we will continue to add to our corporate client base and talent development, while expanding into new verticals and regions. We will continue to drive new partnerships and degree program growth.
We will continue to scale, our differentiated digital courseware offerings, such as ibooks, and we will continue to drive efficiency in areas, such as student acquisition and content development.
Across Wiley as discussed we will be working hard to simplify and streamline our operations to continue to enhance both focus and profitability.
On the ESG and impact front, we are committed to setting and did achieving near and long term companywide emissions targets in line with science base net zero target.
So in sum the key takeaways for today are that our fourth quarter results were mixed strong performance in research and corporate education were offset by cyclical challenges in education.
We delivered on our fiscal 'twenty, two outlook for revenue and earnings and exceeded it for free cash flow.
In fiscal 'twenty, two we managed well through challenging geopolitical economic and labor market dynamics, we do expect to see pressure in fiscal 'twenty three and this is reflected in our budget.
We expect wildly solid revenue growth to continue in FY 'twenty, three driven by strong market fundamentals and the execution of our market aligns strategies.
We are making moves to simplify wildly and improve our operational effectiveness, which will expand our margins beyond fiscal 'twenty three are.
Our balance sheet and cash generation remain fundamental wildly strengths, enabling us to reinvest strategically acquire and reward long term shareholders.
I wanted to let you know that we plan to host an investor day later in the fiscal year with the date to be determined at that meeting we will be providing long range targets.
As always I want to thank our wonderful colleagues around the world for their commitment to our mission. They are continuous innovation and their tireless work in these challenging times.
While these enduring success is the direct result of the outstanding work of this great team.
Before I open it up to questions I do want to say that our thoughts continue to be with those affected by the terrible situation in Ukraine.
While he continues to support humanitarian efforts in that region, as we hope and pray for a path to peace.
I want to thank all of you for joining us I will now open the floor to any comments and any questions.
At this time I would like to remind everyone in order to ask a question press star one.
First question comes from the line of Daniel Moore with.
C. J S Securities Your line is open.
Thank you good morning, Brian Good morning Kristina.
Yeah.
Good morning apologize in advance as I've got I'm going to ask a few different.
Few different routes here, but appreciate patients and the color.
First on a constant currency basis, what are the implied EBITDA margins for fiscal 'twenty three across segments. If not exact terms then at least directionally what do we expect for research APL Ed services.
Before currency.
Well I appreciate the question, Dan and I always appreciate your Youre smart incisive approach.
I will say that at this point in time were not providing particular segment information.
You can see that currency has had a significant impact on our.
R R.
Projections due to the large swings, we're feeling that because over 50% of our business is outside the U S.
But for now we're going to hold tight on the specific margin projections for the digital segment.
Okay.
<unk>.
In terms of.
Spending.
You've obviously been spending aggressively for some time on growth initiatives and certainly in research you've seen there.
A really significant benefit.
Our organic growth, but what are some of the specific investments that youre, making your areas of spend that are increasing as it relates to research and development as we look to fiscal 'twenty three.
Yes, well as you know the approach that we've taken over time is to focus is to identify where we think the growth and profit opportunities are across our business and to focus our time and our investments in those areas and I think you've seen over the past few years that this is bearing fruit.
We are.
We've narrowed our focus significantly to areas that are clearly both strengths and big market opportunities those areas our research publishing.
The overall partner solutions in research and then on the on the education side the areas that focus on career connected education, specifically with respect to the fast growing opportunities in the markets and here of course, I'm talking about our growing talent development initiatives across the company and we are.
Seeing those those bear fruit specifically area of <unk>.
Publishing we continue to invest at a steady rate in this proven profitable and now after the repositioning growing business and research solutions, we are continuing to invest in the areas that are.
That are demanded by our by our corporate clients our partners in our associations and our society partners and as well as our.
Our publishing partners, whereas you know we are.
Powering the ecosystem, so thats where were investing from a market facing perspective internally, we are continuing to work on the simplification.
<unk> automation streamlining of all our processes and systems. So that we can continue to maintain the great margins that we have in publishing and and also the great margins. We have in partner solutions as this business becomes.
More of a significant resource to it to clients.
In talent development, it's very clear, where we need to focus we need to focus on expanding the incredibly successful offerings, we have for the marketplace and getting it to more segments.
The marketplace more geographies and ultimately to broaden it to even more of the key areas, where the corporate world is demanding talent.
You'll even see this of course in our businesses, where we're not expanding investment, but we're continuing investment in areas like Ed services, where we are focused on standing up and delivering the degree programs. The certifications that people need to succeed in this economy I use that as an example, because even in the businesses that we're not identifying as significant growth.
<unk> any capital that we do allocate is focused on the same areas of concrete.
Opportunity and proven strength.
And I will say across the business, we continue to modernize and optimize Dan.
Our systems and to make sure that we are.
Less labor intensive more automated quicker into our cycle times, ultimately delivering better products faster more repeatable more reusable content and of course all of that would be more profitable at the end of the day.
Very helpful. In recognizing we're not giving specific segment or sub segment guide but.
And talent development, just remind me or remind us as you accelerate you mentioned multiple new partnerships and client signings.
Does that typically come with some upfront spend for a quarter or two or three.
Addition to the increase just general investment for growth.
Just the cadence of.
As we've kind of run faster does that a little bit dilutive initially.
Kind of thinking about the cadence over multiple quarters.
Absolutely good question.
Absolutely, we actually know Dan.
These businesses are these opportunities that we're pursuing the addition of new clients.
Spanning to new geographies, there may be a little bit of a go to market. Because we are of course pursuing those clients aggressively in the places in the world where they exist.
But there is no. Unlike certain other businesses. There is no significant upfront development investment we have the product we can develop what we don't have quickly and we based upon the cash dynamics of that business. When we get paid how we get paid there isn't a big upfront investment little bit, but not a lot we basically see these as.
Very nicely cash generative businesses are very close to the point of view protection.
Got it and.
Probably a question for your upcoming analyst day, but you're obviously in your prepared remarks, you are still very committed.
To the old OPM piece or the Ed services piece of it services.
Mid single mid teens margins still achievable in your mind and given the kind of near term macro challenges.
There a timeframe that we have.
Yes, well the answer is they are at mid teens, now well and Christina mentioned this in her remarks, while the overall segment revenue I think.
<unk> EBITDA margin I think it was 12%, we're actually still operating at 15% or above in the services or OPM part of that business.
What happened of course is we have invested in the growth of of talent development and that has.
Weighed down a little bit the overall profitability of that group in the short term as we raced to capitalize on that opportunity, but yes of course, when we see cyclical enrollment challenges like the challenges we faced it most certainly has an effect on both revenue and profit, but we are.
Committed and have proven that we can operate our education services business, particularly our University services business at a healthy profit, we don't see a need to.
Need to refocus because we've always we've always focused on that and we believe it's a it's a good consistent business from that perspective.
Great last from me is.
I think you gave great color on capital allocation leverage ticking lower down to one six times.
Is that still a focus continuing to drive that down lower are likely to be more aggressive in terms of returning capital to shareholders absent larger M&A, especially kind of weird stuff.
Being.
Around current levels. Thanks for all the color.
Yes, Thanks, Dan and thanks always for the great questions I'll, just make a comment or two and then pass it to Christina on this important topic. So we've taken the perspective of a consistent approach to capital allocation for a long time that balances internal investment.
And return of capital to our shareholders.
And we continue we continue to do so our debt levels are an important part of that equation.
And we are comfortable where we are we're not looking to increase or decrease it. We view this as really important point from the perspective of our.
<unk>, we view that we've been on a journey for a long time.
That journey was a journey that required us or that asked us.
To find the opportunities of growth in the massive opportunities in the marketplace of research and education. We've now identified those areas of opportunity those areas of opportunity we've outlined specifically in our in our script and I won't.
And I won't repeat them now, but they are paying off and so wildly over the last four or five years has transformed itself from a company, where we didn't know where the growth was going to come from to accompany that has clear and identified opportunities for growth and we have invested in those opportunities that those <unk>.
Attunity is are paying off you've seen our growth tick up in over the last couple of years as per the metrics that Christina had outlined outlined we've we've been we've been growing our topline and our bottom line now.
We are at the point in this journey when we need to start to return margin to our investors we have to start to convert that growth into free cash flow.
And that is increasing volumes and an increasing percentages and we are definitively are committed to that now why am I going on about this in response to your question well. The answer is that my answer is the foundation for everything we're doing right now we have a debt level that is completely acceptable right now to us.
We have we we exist in recession tolerant businesses research is a must have.
<unk> and the players that are in that segment that we service through our partner solutions business also or are part of that recession tolerant ecosystem on the education side, we tend to benefit from recessions, albeit at somewhat of a lag.
But these are good businesses for us to be in there are growth opportunities, we've identified and we intend to continue to invest in those growth opportunities.
We did not allocate a lot of capital for at four.
For acquisitions last year, we continue to be strategic in our focus about acquisitions and acquisitions to fund those strategies should we find those.
And we will continue to do so at levels like the levels <unk> seen over the last few years should we need to of course, we can use the headroom we have in order to pursue those really good growth strategies.
But for now we're pretty we're pretty comfortable with where we stand and we like the idea that in these uncertain times in these uncertain times, we have dry powder to invest we have the ability to pay it down I'll, let christine to talk about her perspectives on this topic because it's important for you to hear from her but on all of these issues.
We are staying the course.
<unk> identified our opportunities we have dry powder to to attack those opportunities we are committed to returning.
We're committed to returning capital.
And increase our operating leverage on behalf of our investors and.
And we like where we sit down so it's a long winded question, but a couple of things I wanted to lay down as foundation for this important question about it.
About that.
Thanks, Brian I think very well said.
Just to reiterate where we are comfortable with where we are at one six.
Down from $1 seven last year <unk> got room to go higher over too, but there's no plans to do that.
It's really going to repeat we're going to be very mindful of interest expense are macro environments and really the opportunities in front of us. So we feel very good.
We have a good buyback program and we continue to stay the course, there well and and we will adjust if necessary but.
Very good shape.
Thank you Dan.
Again, if you would like to ask a question press star one.
Yeah.
There are no further questions at this time I will turn the call back over to Mr. <unk> for closing remarks.
Yes so.
I'll make a few closing remarks before I move on to <unk>.
To.
Looking towards the future.
So while we haven't provided any long term guidance, we do expect to provide long term guidance at our Investor day that is coming up which I hope you'll all attend we're very excited about the future of this company. We look forward to talking to you at that time, we're going to be talking about this trajectory we're on to turn.
Our growth, which we're confident in.
Into increasing operating leverage and as you look across our segments. What you will see is that we have increasing we have consistent confidence in our ability to maintain our margins or EBITDA margins.
Our operating income margins in the research publishing business, we've proven that we can do that as we move through the transformation. We've found growth. We have found it at consistent margins, we like the look of the partner solutions business and where that's going these are.
Businesses that are software and tech enabled services, where we expect to generate very good operating return and at our Investor Day, We'll talk more about that as we look across our other segments.
On our on the APL side, we have we have businesses that tend to return over time very good consistent earnings back to the company they've dipped a little as we have gone through some of these cyclical.
Trends with regard to enrollment and even longer as we've gone through transformations of those businesses.
And while we're not providing outlook on the future of say, our Ed pub business, what I am saying is we like the way that business fits into our portfolio and we like the fact, we are confident in the fact that we can continue to generate very solid earnings off of the revenue there. So.
So while not a growth engine for us it's an important component of our actively managed portfolio, which are the words Kristina used in her remarks.
Earlier.
So we are very confident in the future of that business and that business is doing its pivot as well and as it pivots toward these career connected opportunities again, you look at XI books very career connected very good margins, we will be increasingly in businesses that we that we cannot only generate a little bit of growth out of but also generate good margin.
And I've already made comments on the on the margins with respect to.
Two hour.
Education services business, and so I won't I won't underlying those but all that does all of that should give confidence that now we are at a stage, where wiley with its intense focus that Kristina mentioned earlier on operational excellence can start to generate the operating leverage that our investors seek and debt.
They deserve.
So with that I will thank you for attending I'll look forward to talking to you at our next.
Our next conference call and and.
And then look forward to hoping to see you all at Investor day, as we get that set up thanks very much.
This concludes today's conference call you may now disconnect.
Okay.
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