Q2 2023 John Wiley & Sons Inc Earnings Call

Yes.

Good morning, and welcome to why lease Q2 fiscal 2023 earnings call.

As a reminder, this conference is being recorded.

This time I'd like to introduce <unk>, Vice President of Investor Relations, Brian Campbell. Please go ahead.

Thank you and Hello, everyone.

We are Brian <unk>, President and CEO , and Kristina Vantassel Executive Vice President and CFO .

A few reminders to start the call is being recorded and May include forward looking statements shouldn't rely on these statements as actual results may differ materially and are subject to factors discussed in our SEC filings.

The company does not undertake any obligations to update or revise forward looking statements to reflect subsequent events or circumstances.

So while it provides non-GAAP measures as a supplement to evaluate underlying operating profitability and performance trends.

These measures do not have standardized meanings prescribed by U S GAAP.

And therefore may not be comparable to similar measures used by other companies nor should they be viewed as alternatives to measures under GAAP.

Unless otherwise noted we will refer to non-GAAP metrics on the call and balances are on a year over year basis and will exclude the impact of currency.

After the call a copy of the presentation, the transcript and a playback of the webcast will be available on our Investor relations webpage at investors that Wiley Dot com.

And now I'll turn the call over to Brian Me back.

Good morning, everyone. Thanks for joining us.

I often do I'll start by pointing to why these mission, which is to unlock human potential do so by powering scientific research and career connected education.

This is far more than just the statement, it's our purpose our culture and a differentiator to.

Through many cycles and periods of disruption the Wiley brand has helped us to win and retain customers authors and partners and together with them, we have promoted science growth and social progress for more than 200 years.

Wildly team accomplished a lot in the second quarter. This is both despite and in response to a challenging economic environment. We've seen a confluence of headwinds. These includes decades high inflation low consumer confidence a tight job market rising interest rates FX volatility and ongoing geopolitical.

These pressures have caused a pullback in consumer spending that has affected our consumer facing and enrollment dependent businesses and this has impacted our revenue performance for the quarter and our growth expectations for the year Kristina will speak to that later in the call.

Despite all this our core growth engines of research publishing research solutions and corporate talent development remains strong and they are performing well research has a solid growth trajectory consistent margins in a recession tolerant profile. It continues to be supported by ever increasing R&D spending worldwide that drives up publishing volume.

And the demand for wireless research content and solutions.

2000, global R&D has more than tripled to $2 four trillion.

This spending growth has persisted through multiple recessions.

Corporate talent development is now a major growth driver for Wiley driven by the success of our unique education services that help corporations to fill their big talent gaps rapidly and reliably.

That said earnings were down this quarter due to revenue challenges in academic and professional learning along with ongoing investment in our core growth areas, most notably research.

To mitigate these revenue challenges, we've accelerated our cost reduction program, including implementing targeted workforce actions and general hiring freeze real estate consolidation and disciplined expense management.

Our important work to simplify and optimize Wiley is moving forward steadily as part of this we continue to streamline our structure to better align with our customers and their needs and this is helping us to drive greater impact synergy and efficiency, you'll recall that last quarter, we reorganized our research segment into publishing and salute.

<unk> to great effect.

Now we are reorganizing our education lines of business into two new customer centric segments to achieve similar goals, namely the aligned tightly with why at least two primary target markets and education universities and employers I'll talk about this a bit more later in the presentation.

Let's look at our Q2 performance as always all variances exclude currency impact why lease revenue for the quarter grew 1%, but it was down slightly on an organic basis growth in open research research solutions corporate talent development and corporate training offset declines in APL publishing lines and in universe.

<unk> services.

Adjusted EBIT declined by 4%, which is in line with our expectations for the quarter. The decline is attributed to the soft APL revenue performance combined with our planned investments to scale, both research publishing and research solutions.

Our adjusted EBITDA margin of 24% came in slightly ahead of prior year Kristina will take you through our segment performance in more detail.

Adjusted EPS declined 13% due to the adjusted EBITDA performance and two $5 million of additional interest expense compared to prior year, a result of the current rate environment.

As you know, we hold ourselves accountable for achieving our commitments.

In research, we said, we would do four things in fiscal 'twenty three one publish more to meet global demand and drive revenue to establish more transformational agreements three Gail our research solutions and for streamline our workflows to increase both revenue and profitability I am pleased to say that we're making good progress.

On all fronts on publishing more we grew article submissions this quarter by 6%, although publishing output rose only 1% due to variances in publication timing.

Open research continues to be a strong driver of growth for us with OE article output up by double digits.

We continue to make good progress in the market on transformational agreement Reese.

Recently, renewing our landmark countrywide agreement in Germany.

This multi year renewal is significant in that it validates our model and our long term customer centered approach.

The new deal gives research authors in Germany, even more publishing options with an additional 240 journals integrated into the new contract.

To date, while he has signed over 40 agreements representing over 2000 institution spanning 23 countries.

The deal pipeline remains very strong, particularly in the U S and Europe .

In the U S. These important agreements will allow our customers now to comply with the new White House guidance on federally funded research as a reminder, the U S office of Science and technology policy. The O S. T. P issued guidance in August calling for all new federally funded research to be open and freely available starting in 2026.

As you know this direction is fully aligned with our strategy and supported by our strong momentum in open research.

And research solutions, we continue to see strong momentum, we signed 18, New research solutions partners in the quarter, including project Hope renowned global health and humanitarian relief organization.

We also executed several product launches, including the career center for the American College of emergency physicians.

As expected cross selling upsell opportunities are accelerating within our network of 900 Society and corporate partners.

We expanded nine partnerships with additional services, including our multifaceted partnership with a AAA us the world's largest scientific society.

We now provide them with editorial services distribute their journal content through our platform and manage their important job board, which is appropriately called science careers.

Wildly now powers the recruitment sites four of the world's most significant scientific organizations to.

Two of them are also primary publishing competitors, demonstrating the power of wireless ecosystem approach.

I recently attended the Frankfurt book Fair, the most important industry event for the research publishing community.

While there I met with lots of prospective customers and industry stakeholders got to say that the buzz around wildly and our solutions strategy is incredible.

After the event one prominent industry pundit summed it up perfectly writing this quote.

While he is taking a bold stance with this new division investing and the collaborative solutions that will help the industry successfully navigate the transformation necessary and open research.

It is likely to be a good move for Wiley, helping to extend its customer base diversify revenue streams grow revenue through facilitating upselling and sustain its partnerships across the publishing supply chain.

Wiley will enjoy access to volumes of data about publishing and research trends, which could open up new product for business opportunities as well as greater strategic advantage.

And quote and.

Pretty much says it all.

Finally, we continued to drive increasing automation intelligence and efficiency across the research publishing process and our investments paying off for example, the intelligent systems. We are implementing are allowing the proportion of submitted articles kept in the wildly universe to continue to rise.

Year to date, 66% of rejected authors were offered another wildly journal option up from 52% the prior year period and 33% in fiscal 'twenty. One these efforts will pay off with incremental revenue growth and strong margin contribution over time.

So Q2 was another solid quarter of execution and research.

Now, let's turn to our commitments and career connected education.

At the beginning of the year, we said we were going to expand our corporate and University client base drive growth in our differentiated courseware offerings and gain operating efficiency.

On growing the customer base, we're making good progress wildly.

Wiley signed another six large corporate clients and talent development during the quarter. These included multinationals in technology health care financial services and consumer Staples.

The client pipeline remains strong.

And we are seeing double digit growth and employee placement.

Of course, we are monitoring the labor market very closely given the current economic uncertainty, but so far demand for our talent development remains robust across both existing and new clients. It.

It is important to note that there remain over 300000 open tech jobs in the U S. Even higher than it was before the pandemic.

While they also continues to be the go to partner in University services, We signed four new partnerships this quarter Cal State San Marcos The University of the Sunshine Coast in Australia Bay Path University in Massachusetts, and burn now University in Georgia.

Within our existing partner base, we added nine new degree programs for a total of 56 new programs year to date.

These new programs are underlying drivers of our future growth.

While enrollment remains a cyclic cyclical headwind, we continue to see consistent institutional demand for wireless value added services.

Let me say, a few words about enrollment and its drivers.

Despite the softening economy, we're still seeing a very strong labor market. Consequently, many would be students are being drawn directly into jobs instead of preparing for their careers with education.

We expect this to unwind as the economy slows, but there is historically at 12 to 18 month lag between the start of a recession and a material uptick in university enrollment.

In any case, our focus now of course is unhealthy our university partners to compete in this challenging moment, while also preparing them to win as the cycle turns back in their favor.

Wildly of course continues to deliver differentiated courses in courseware for learners are stem focused courseware called XI book, So a growth of 27% this quarter.

This is a great example of how we win despite market challenges, we delivered great products in high potential disciplines.

During the quarter, we launched our first courseware solutions and data science are rapidly growing career connected subject.

We also won an important adoption with the Virginia community College.

And we expanded our institutional relationships with three of the largest online universities in the United States.

Finally on the efficiency front.

We're actively reorganizing and right sizing the APL publishing lines to reflect market realities and improve their profile.

Among other things, we are reducing overhead focusing our development efforts outsourcing lower value editorial activities and modernizing our go to market approaches and.

And in talent development, which is in rapid growth phase, we are driving toward meaningful profit contribution by automating and reengineering our processes as we scale the business.

So overall in education, we continue to execute on our fiscal 'twenty three commitments, despite the economic and market headwinds.

We continue to drive real world impact at wildly through our core business activities in research and education, while making progress on our commitment to the UN sustainable development goals.

We remain focused on three of the U S D g's quality education, reducing in equities and climate action.

In career connected education, we are actively expanding access to high quality education, and gainful employment and thus we are working to reduce inequities.

In fact, 60% of our placement candidates globally now come from underrepresented population.

This is well ahead of our target.

And as a leading scientific publisher, we publish for example over 100 journals related specifically to climate science.

Wiley is committed to being carbon net zero by 2040 aligning to the critical climate goal of preventing the global temperature from increasing beyond one five degrees.

This critical goal is in line with both the science based targets initiative and the Paris agreement.

In addition, while it continues to be recognized for our ESG progress and risk profile, achieving strong scores from sustained <unk> S&P ISS and MSCI.

Hats off to all of our Wiley colleagues for their dedication to and support for our ongoing impact journey.

I'll now pass the call over to Kristina to take you through our segment results cost measures and outlook.

Thank you Bryan and Hello, everyone.

Although we are navigating through a challenging economic environment, our corn research remained strong with healthy profit margins in a recession tolerant industry.

We remain bullish on our opportunity is there to expand and scale, our publishing and solutions offerings.

And our academic lines, we are tackling our cost structure to align with current market realities, which are both cyclical and secular in nature.

Talent development continues to grow nicely as we extend into new industry verticals and new regions.

We're investing there to grow our client base, while driving towards meaningful profit contributions in the future.

And research as Brian noted, we continue to drive strong momentum as we invest to publish more high quality research and do it more efficiently.

We've also set our sights on scaling solutions offerings, such as content platform.

Publishing and other revenue generating services to help support the industry's transition to open research.

The team spent considerable time out in the market in Q2, and the feedback from both current and potential customers is that they're focused on the changing economic and policy landscape and they need help in the OE transition.

The recent <unk> guidance only confirms our solutions strategy here and we believe we are well situated to seize that opportunity.

Research revenue for the quarter was up 3% or 2% organically.

Research publishing revenue rose, 2% driven by continued growth in open access with <unk>.

Article output up 34% over prior year.

Research solutions revenue was up 11% driven by recent acquisitions and modest organic growth from our platform services and career centers.

As Brian noted, we continue to make terrific progress on adding new solutions partners, including 18 logos this quarter.

Well as upselling existing ones.

To give you a sense of the upsell opportunity only around 15% of our current solution partner subscribed to more than one service and roughly only 5% subscribed to more than three.

Given the expanding pipeline of publishers societies and corporations. We recently increased this investment case in this space.

A quick note on restarts integrity.

Q2, we attracted a small number of articles due to an investigation into maybe your activity in selected OA journals.

We are constantly scrutinizing, our publishing process to ensure the quality of our content.

Our industry continues to work very closely together to ensure the peer review process, which underpins the knowledge in the industry.

Adjusted EBITDA in research declined 4%, primarily due to investments to expand our editorial capabilities to manage increasing publishing volume.

And to scale, our solutions offerings to meet partner demand.

Our adjusted EBITDA margin was 36% for the quarter on par with prior year.

Year to date revenue was up 3% and adjusted EBITDA was down 7%.

We expect improvement in the second half on both revenue and profit driven my open research and solutions growth as well as lower expenses.

Now onto APL.

The current economic environment is particularly challenging for higher Ed course material and professional books, given the pullback in consumer discretionary spending and cyclical enrollment headwinds.

Note that U S. Enrollment this fall was down 1% after being down nearly 5% in the spring and 3% last fall.

APL revenue for the quarter was down 10%.

Driven by a 10% decline in Ed publishing and an 11% decline in professional learning.

Ed publishing side double digit print declines offsetting growth in digital content and courseware.

In addition to inventory reductions across our channels. We also saw soft consumer demand.

On a more positive note as Brian noted.

<unk> digital courseware continues to grow nicely and we see strong institutional demand.

During the quarter, we expanded our partnerships with southern New Hampshire University.

Western Governors University, and Arizona State online.

And our professional learning lines declines in professional publishing offset continued double digit growth in corporate training.

And our professional publishing lines, which includes books for business Finance and Tech professionals, we are seeing both inventory reductions and slowdown in consumer demand.

The bright spot here is our our virtual and in person corporate training services, which continue to see strong growth as companies invest in leadership and team development.

Adjusted EBIT on APL was down 12% this quarter, mainly due to the revenue declines in our publishing lines offsetting expense savings.

Our adjusted EBITDA margin is 33% for the quarter, which is consistent with prior year.

Year to date revenue was down 6% and adjusted EBITDA was down 18%.

As a reminder.

We are adjusting our cost structure to align with market conditions with the restructuring savings to materialize in the later part of the year.

Now for education services, which is our overall revenue growth of 17% or 13% organically.

This is driven by talent development revenue growth of 61%.

As Brian mentioned, we added six new multinational corporate clients this quarter.

We're rapidly growing our tech and play placements up over 60% compared to prior year.

And we continue to expand into new regions with strong placement growth in eastern Europe and India.

University of services revenue declined, 1% or 6% organically driven by ongoing cyclical enrollment headwinds and lower revenue share in our long term renewals.

As we discussed last quarter, we continue to work with our strategic partners to ensure long term mutually beneficial relationships.

For some this means the narrow service bundle at a reduced share revenue to Wiley.

While this will weigh a bit on our revenue performance over the intermediate term adult healthy relationships and were optimizing our offerings and cost structure to ensure a healthy return.

Some institutions will continue to reference an upfront fee for service model, which will allow us to remain flexible in our business model to ensure a good commercial outcome.

Adjusted EBITDA was up 69% driven by the revenue flow through and talent development and the timing of expenses and University of services. Some of it related to hurricane Ida and some of it from year over year swings in marketing and advertising costs.

Our adjusted EBITDA margin of 17% for the quarter compared to 12% in the prior year period.

Year to date and services revenue was up 14%, while adjusted EBITDA was down 14%, mainly due to revenue performance at University of services and investment to expand client relationships and talent development.

As Dorothy speaking, while he has held up well through difficult economic periods because of the nature of our businesses.

First scientific research is vital to economic progress and therefore spending on it continues through the cycles.

Second.

While we're currently working through unusual enrollment challenges the education.

Education sector tends to be countercyclical with people going back to school in times of market contraction.

Nonetheless, the current environment calls for us to not only be prudent but to act decisively and drive cost savings and efficiency gains while investing in our core growth areas.

We recorded a $14 million restructuring charge in Q2 stemming from a targeted workforce reduction and real estate optimization on top of the 22 million we recorded in Q1.

We anticipate these actions to generate targeted run rate savings of approximately $15 million $29 million of savings as expected. This fiscal year and is reflected here in 'twenty three outlook.

The vast majority of these savings materialize in the back half of the year.

With implement them at hiring and travel freeze to mitigate first half revenue performance.

And we're making steady progress in our broader simplification and optimization efforts.

We continue to consolidate our office footprint with a 32% office space reduction since spring of 2020.

This is up from 28% at the end of last quarter and 18% at the end of last year.

We are also in the process of closing our technology development and APL content management Center in Russia.

It's been one of several Ali Tech centers around the world and we have comprehensive migration plans underway.

I'll update you on this and other Q3 savings initiatives when we get to March.

Our process of simplification and optimization is a major focus that will yield increasing benefits in the quarters and years to come.

We will keep you posted on our plans and progress as we move forward.

Free cash flow year to date was a use of $126 million on par with prior year with lower cash earnings offset by lower incentive compensation payments for a fiscal 'twenty two performance.

As a reminder, our cash flow is normally a use for the first half of the year due to the timing of collections for journal subscriptions Capex was $50 million for the half essentially in line with prior year and there were no acquisitions of note.

We remain opportunistic on the acquisition front as he looked at scale and capabilities in research and corporate talent development.

At the end of October we had $118 million in cash on hand, and undrawn revolving credit available of $464 million.

Also note, we recently amended our revolving credit agreement to extend more than $1 $3 billion in credit capacity through November 2027, with approximately $200 million of existing credit 10 minutes commitments to remain through the current maturity date of May 2024.

Our current credit facility size remains at one 5 billion.

Net debt to EBITDA ratio was two one at the end of October compared to two zero in the prior year.

Finally, we allocated $56 million year to date to dividends and share repurchases on par with prior year.

Our current dividend yield is around 3% and we acquired 382000 shares at an average cost of $45 84 per share.

Total spend on repurchases is around $17 million in line with prior year.

In summary, our strong balance sheet consistency of annual cash flows and ample liquidity gives us the flexibility to continue to invest in our core and return cash to shareholders.

Let's review our full year outlook.

Due to the market related headwinds in education, we are reducing our revenue guidance at constant currency for mid single digit growth to low single digit growth.

Revenue growth continues to be driven by solid performance in research and corporate talent development.

We are reaffirming adjusted EBITDA at constant currency in the range of $425 million to $415 million, given second half restructuring savings and other cost measures.

Adjusted EPS at constant currency is now trending to the lower end of the range of $3 70.

$4.05, mainly due to rising interest expense.

As I mentioned at the start of the year adjusted EPS guidance reflects higher interest expense higher tax expense and lower pension income.

These three items were expected to account for 35 cents of additional adverse impact this year.

This impact is now anticipated to be 44 cents due to the rising interest expense.

As a reminder, our adjusted effective tax rate is expected to rise this year from 20% between 22 and 23%.

This is primarily due to a less favorable mix of earnings by country.

Increase in the U K statutory rate.

In terms of lower pension income note that our pensions have been frozen since 2015 and are above 90% funded.

We are reaffirming free cash flow in the range of $210 million to $235 million.

Positive cash earnings and lower incentive payouts for fiscal year 'twenty two performance are expected to be offset by higher cash taxes and interest.

Our capex outlook is now around $110 million to $120 million modestly lower than anticipated.

Capital investment is primary focus on platform and product development and research and corporate talent development.

In summary, we are navigating difficult market conditions in our academic lines, but our core growth areas are solid.

We are aggressively managing our cost structure to mitigate the revenue challenges and taking tangible steps to reduce complexity.

With that I'll pass it back to Brian .

Thanks, Christina before I sum up let me say a few more words about our segment realignment.

The changes we are making in Q3 focus on our education group. The research segment will remain unchanged research publishing and research solutions are already focused customer centric lines of business that complement one another and that together are a strong market leader delivering new pathways for profitable growth.

In education widely targets, two primary customer groups universities and corporate customers.

Organizing our segments around these groups will naturally result in a simpler more customer centric and more efficient Wiley.

Our new academic segment will consist of two lines academic publishing and University services.

Academic publishing will incorporate both education publishing and professional publishing together the academic segment team will focus on delivering outcomes for learners in university and other institutional settings, leveraging wildly as full suite of content platforms and services.

This alignment will enable both revenue and cost synergies over time.

Our new talent segment will include <unk> talent development, and corporate training products and services.

The new talent team will be fully focused on meeting the critical talent needs of employers by delivering all of <unk> training sourcing and Upskilling solutions.

This customer centric alignment will allow us to achieve more revenue and cost synergies as we optimize both our offerings and our go to market efforts for the corporate customer we will begin reporting on these new segments in Q3.

So let me quickly summarize the key takeaways for the quarter.

Despite the difficult economic environment, we continue to execute well on our commitments.

Our results have been weighed down by consumer spending and enrollment challenges in education, but our core growth areas of research publishing research solutions and corporate talent development remains strong.

We are actively tackling our cost structure to adapt to cyclical headwinds and to drive long term margin improvement.

We believe that it's simpler Wiley is a better wildly and we are consistently taking action to achieve greater focus and alignment with fewer moving parts.

This quarter, we are reorganizing education around our customers to drive better alignment synergy and efficiency.

<unk> consistently strong balance sheet and cash flow continued to enable us to reinvest while rewarding long term shareholders with dividends and share repurchases.

One final, but important point, we decided to move our Investor day, which had been planned for April to October specifically to October 12.

We had hoped to have it sooner, but we're shifting it for two important reasons.

We are now hard at work driving toward a simpler and more impactful wildly and we wanted to be able to share our full plans.

We will be better able to do this in October .

In the meantime, we will continue to update you on the progress, we're making along the way.

In addition, the ongoing market uncertainty, particularly affecting our academic lines has clouded our ability to commit to long range targets, which we plan to do when we see you in October .

In the meantime, we will continue to update you on the progress we are making along the way.

In closing as always I want to recognize the global wildly team for continuing to execute at a very high level through this challenging period every day they bring their full selves to work and make a real difference and for that I am extremely grateful.

There was 2022 comes to a close I wish all of them and all of you a very happy holiday season, and a healthy and prosperous 2023, I will now open the call to any questions.

At this time, if you would like to ask a question press star followed by the number one on your telephone keypad. If you would like to withdraw your question again press Star one.

Your first question comes from the line of Dan Moore with CJS Securities. Your line is open.

Hi, Good morning, it's Pete Lukas for Dan.

Just starting with what's causing the clients to slow spending on professional learning is it the general macro concerns that you mentioned or are there other factors factors out there and if so what visibility do you have in terms of how long that may last.

And on the flip side, what do you see as the main drivers for the strong corporate training that you've seen.

Yeah, a great question, great to have you on the phone Pete.

So in professional learning we are seeing.

We are seeing some softness but not related to a to a slowdown, particularly in corporate spending what we're seeing is slowdown in consumer channels.

And that slowdown in consumer channels is largely a cyclical nature of the underlying demand for our for our professional learning products remains remains quite strong in fact, we're seeing excellent growth out of our corporate training.

In two.

<unk> leadership, and certainly our corporate talent development, which we'll talk about later, what's driving demand in in professional learning and some of the softness is effectively an industry restocking that's happening at our key retailers key online retailers, where they have adjusted their inventory.

Policies and practices and in the near term have.

Right sized basically their inventory according to what they believe demand is.

And so therefore that is what we would call a cyclical or a temporary thing and that should come back. There is however, and it's important to note.

And underlying headwind that is economic that is driving our that is driving softness in consumer demand in that consumer demand relates to relates to professional buying a book it relates to a person spending money on their own on their own personal development it but we're not seeing.

The demand yet from the demand any demand softness at this point due to the economic pullback in professional development funded by corporations and that's leading to a very solid performance in our corporate training business, where our businesses, which are growing very very nicely and in talent development, specifically as you can see.

We're seeing a tremendous investment that companies are making in the acquisition the development and the retention of their talent, notably one of the things that we've seen in this cycle.

As in prior cycles.

He is a reallocation of funds incorporations toward digital education, and talent development and the most key areas that companies need to succeed companies are still obliged to pursue their strategic plans and they are investing to do so what we're seeing is less demand across the industry or sector for in person training.

But we are primarily in digital training at this point in time, and so we're seeing pretty a pretty good performance. There as you can tell from our numbers.

Very helpful. Thank you and in terms of the day the faster than expected decline in print materials would you say, that's mainly due to enrollment or as usage taken another leg down.

Yeah. So no by all accounts usage and attachment of curriculum materials professionally published are the same as they've always been what's happening now is different than in prior periods, where we had concern about the evolution of this segment in the long run what we're seeing is very similar to the answer that I just gave you on professional.

Bernie.

Which is that during this period, we've seen significant economic economic changes and that has caused a two primary factors the largest being this inventory adjustment.

And that we see at our retail channels that road that accounts for the bulk of it and the second is this idea of consumers spending.

Because I call. It consumer doesn't doesn't mean it doesn't affect students students are looking for ways to save money like everybody else and so we have seen.

Certainly we've seen a we've seen the enrolment softness we see that across a number of our businesses that does affect the underlying demand for the units of our products. Both in our in our publishing lines and also in our services lines.

But really what we're seeing right now is primarily a factor of these these two cyclical factors that I keep talking about with regard to inventory and AR and underlying consumer demand, but not shifts in the in the underlying nature of the of the sectors that we're in.

Or are there long term.

Great. Thanks, and then just jump into research prior to open access becoming a larger percentage of your research revenue you would provide updates on what percentage of your following years Journal subscriptions were under contract is that still a relevant metric for you and if so how is it trending related to.

Years past.

Yeah, no, we're not providing that guidance now and it is a I will say that we continue to see very very strong demand. Most importantly for our transformational of OE agreements. These are the agreements by which we help the we help the market transition from the traditional models to the more mixed and open models that were good.

See in the future we're at a point in the year, which is where where we haven't seen much of that activity. Just because this is the way the annual timing and patterns work out we will see we have a very strong pipeline pipeline of transformational agreements in our more traditional subscription agreements will continue to will continue to chug along as norm.

And we expect that to two.

Pick up seasonally as we move through the balance of the of the fiscal year. So so.

So yes things are trending as we would expect them to from a pipeline perspective and from a transition perspective and that of course supports our our long term open access our strategy our long term aggressive forward leaning.

Strategy toward embracing.

The new models in the marketplace, it's a little less relevant these days to talk about traditional traditional subscription deals.

Oh, great. Thanks, and last one for me just on a more.

Big picture can you give an update on capital allocation priorities outside of internal investments is M&A still a priority or is more focused on debt reduction and perhaps opportunistic share repurchases.

Yeah I'll start the question and answering the question Pete and then I'll hand, it over to Christina.

Our capital allocation is driven by our belief in the long term opportunities that we have as a company and we divide it obviously into multiple categories. We've been very consistent about that the first category is the investment in the future of this business, both through organic investments, which you've seen and through inorganic investments such as.

As M&A and I will say our M&A strategy. Here is is is consistent we are being cautious of course, we're being patient and were being focused so our strategy drives our capital allocation and our and our capital allocation is thus tightly aligned to our investment priorities in our growth.

Areas those being research publishing research solutions and corporate talent development and everything flows flows from that so Kristina, perhaps you can say a few more words sure. Thanks Pete.

We are continuing to remain balanced on capital allocation.

Brian's point and just as a note there that you know well.

Historically, our steady cash flow has allowed us to be very balanced and it has rewarded us in difficult times and this is no exception so.

We're continuing to look at this we are still keeping marching towards our priorities.

Specifically mentioned that.

Now that isn't moving up our priority list given the market environment and our interest expense outlook and we will look at that as we go forward, but I'm not uncomfortable with our leverage right now which is which.

Which is at a good place and finally on dividends and share repurchases. You also mentioned just as a reminder, there we allocate about half of our free cash flow to dividends and share repurchases and that's in line with with last year and so we have a long streak of raising our dividend annually, we're paying a nice yield and share repurchases.

I've also been steady and well continue to look at that but we're going to continue and stay the course there.

For the question.

Great. Thank you for the time I'll jump back in the queue.

There are no further questions at this time I will now turn the call over to Mr. In APAC.

Alright, well I want to thank everyone for joining us today and wish everyone, a very very happy healthy and holidays and a prosperous new year and we will look forward to seeing you and sharing our Q2 results in March thanks very much.

Ladies and gentlemen, thanks for participating this concludes today's conference call you may now disconnect.

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