Good morning and welcome to Wiley’s Second Quarter Fiscal Year 2021 Earnings Call. As a reminder, this conference is being recorded. At this time, I'd like to introduce Wiley's Vice President of Investor Relations, Brian Campbell. Please go ahead.

Thank you. Good morning, and welcome to Wiley's second quarter 2021 earnings update. With me today are Brian Napack, President and Chief Executive Officer; and John Kritzmacher, Chief Financial Officer. Brian and John will make some formal comments and then we'll open up for some questions. A few reminders to start. The call is being recorded and may include forward-looking statements. You shouldn't rely on these statements as actual results may differ materially and are subject to factors discussed in our SEC filings. The company does not undertake any obligations to update or revise forward-looking statements to reflect subsequent events or circumstances. Also Wiley 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 variances are on a year-over-year basis and will exclude the impact of currency. After the call, a copy of this presentation and a playback of the webcast will be available on our Investor Relations webpage. I'll now turn the call over to Wiley's President and CEO, Brian Napack.

Good morning, everyone. Thanks for joining today. Our performance this quarter underscores the value of Wiley’s role in the global economy. Through the year, we've seen an acceleration of the trends that have defined our markets for years. And this is driving a strong increase in the demand for scientific research and online education. Our first half performance demonstrates that our longstanding strategy to lead an open research and digital career-focused education is paying off, especially in these extraordinary and challenging times. Now, more than ever, the world is turning to research and education to help solve its unprecedented challenges. Scientific research is firmly in the spotlight and is more and more integrated into both corporate strategy and public policy. As part of the United Nations’ sustainable development goals, countries have pledged to substantially increase their R&D spending and their number of researchers by 2030. Today, as always, we see investment flowing into the most critical fields of study, including areas such as renewable energy, artificial intelligence, and of course, vaccine science. This demonstrates how peer-reviewed research always remains essential to both problem-solving and innovation. At research institutions worldwide, demand to publish high quality research keeps growing, and this is evidenced by a rapidly increasing publishing output. The demand to apply this research is also growing rapidly. And this shows in the record consumption of scientific content on our platforms. COVID-19 has brought the future of education forward, accelerating the digital transformation of learning in universities and companies; and now, of course, in our homes. Career-enhancing education is increasingly delivered online and it is finally becoming more affordable and more broadly available, exactly what the world needs. Once again, post-secondary education is proving to be countercyclical as people seek a leg up in a tough job market. Despite the practical challenges of delivering education in a pandemic, enrollment this fall in both four-year and graduate degree programs has been much better than initially anticipated. And we've seen very strong demand for our online degree programs. We've seen similar growth in our digital content and courseware, as people have pivoted to these lower priced, higher impact products. Beyond the traditional degree, demand is also increasing for new forms of credentials that are more focused and more affordable and that demonstrate that workers have exactly the skills that employers need most. Across Wiley, we view our role as to connect education to career outcomes. The pandemic has only accelerated the global focus on closing the skills gap, especially in areas such as IT and digital skills. And this has validated our focus on these areas. Our strategy and research has been consistent: publish more and publish better, accelerate profitable growth in education services and drive growth in online curriculum and courseware. Our investments in these areas are producing results. Research Publishing & Platforms delivered robust growth again this quarter with increasing profitability driven by continued gains in open access. In Education Services, we continue to deliver strong online enrollment growth and win university partnerships. Importantly, we exceeded our fiscal ’22 EBITDA margin goal of 15% both in the second quarter and for the first half of fiscal ’21. As a reminder, our Ed Services plan is for double-digit revenue growth with a sustainable EBITDA margin of at least 15%. In Academic & Professional Learning, Education Publishing continues to gain momentum as the digital transformation of university education accelerated with revenue growth in digital content and courseware now outpacing the decline of print book sales. We continue to gain share in this highly competitive market. Professional Learning remains weighed down by COVID-19 lockdowns, particularly in face-to-face corporate training, although we are seeing very good early results from our rapid transition to online delivery. We continue to drive cost savings throughout Wiley and the pandemic has allowed us to move even faster. As a digital company with a mission-driven culture, we transitioned rather seamlessly to a virtual operating model. Based on this success, we will be enabling more of our Wiley colleagues to work remotely post-COVID, allowing us to reduce our real estate footprint and generate material run-rate savings. Finally, Wiley’s free cash flow through the first half was $32 million ahead of prior year, primarily due to improved earnings. Let's talk about our Q2 results in more detail. Growth in our areas of strategic focus, such as research, online education and digital courseware offset COVID-driven declines in print books, test prep and in-person corporate training. Revenue rose 4% over prior year and was even on an organic basis. Our earnings improvement this quarter was primarily driven by good top-line performance, cost improvement from business optimization and COVID-related savings. Adjusted EPS and adjusted EBITDA were up 7% and 12%. On a GAAP basis, we reported an additional $14 million discrete tax benefit related to the U.S. CARES Act. For the half, revenue was up 3% over prior year to $922 million. Adjusted EPS was up 33% to $1.41 and adjusted EBITDA was up 19% to $202 million. Our strategies in research to grow open access to drive platform growth and optimize our publishing operations continue to bear fruit, with revenue and adjusted EBITDA up 5% and 14%. Our adjusted EBITDA margin in the quarter was 37%, up from 35% in the prior year period. Underlying the business, we see very strong growth in article output, up 22% over prior year. Some of the increase can be attributed to the unique environment we're in with the largest growth coming from pandemic-related subject areas like clinical medicine and epidemiology. That said, we believe strong demand to publish is here to stay. It's important to note that demand was very robust prior to COVID-19 with article submissions up 9% in the nine months through January 2020. So we're seeing strong secular growth in the demand to publish, which of course directly benefits us, especially as we grow the volume-driven open access model. Our strategic national agreements in Europe are succeeding and they are generating publishing volumes that are materially exceeding our expectations. As a reminder, these multi-year agreements are a combination of pay-to-read and pay-to-publish models. And they are typically done with large national consortia in places like Germany and the UK. We're seeing great momentum coming from these agreements in the form of increased article output and new publishing opportunities. This quarter, we launched Natural Sciences, a major new flagship journal brand created in partnership with the influential Projekt DEAL consortium out of Germany. We're very excited about this promising top-quality journal that will publish only the best research around the world. On the consumption side, usage of our content continues to be very robust with continued double-digit growth in full-text downloads on the Wiley Online Library. Revenue from our Research Platforms rose 11% on new customer launches for Literatum, our industry-leading content distribution platform. Our customer retention rate on a trailing 12-month basis continues to be an exceptional 98%. Corporate solutions, which is another growth area for us in research, continues to gain momentum. For example, we've been expanding our career center platform offerings, and this is starting to pay off in even deeper relationships with our leading network of societies, associations and corporations. For example, we now manage the job board for the world's largest scientific society AAAS, the American Association for the Advancement of Science, and we recently secured job board contracts with the global pharmaceutical companies GlaxoSmithKline and Pfizer. As a company, we're acutely focused on serving researchers and building a vibrant ecosystem that helps them to succeed and our results are showing it. In the second half, we have two key objectives. First, successfully close calendar year ’21 subscription renewals; and second, take full advantage of the continued strong demand to publish in our journals. Through October, we closed about 20% of our annual renewals compared to 16% at this time last year, and we've made great progress in renewing key accounts. That said, we continue to anticipate modest pricing pressure in subscriptions due to COVID-related constraints and library budgets. But we expect to offset this with strong growth in open access, where revenue is a direct function of the quantity of articles published. As a market leader with nearly 1,700 journal brands and an unmatched reputation, we're in a terrific position to publish more, including publishing more of the submissions we receive. In the nine months of calendar year 2020, we received over 600,000 submissions, accepting around 25% of them. Many rejected manuscripts are high quality, but just don't fit a particular journal. We continue to improve the efficiency in transferring these articles to other Wiley journals, where they do fit without sacrificing quality. We're now using artificial intelligence to seamlessly evaluate and route articles to appropriate journals. Given the breadth of our journal portfolio, this cascading capability provides an important competitive advantage and source of growth. Overall, researchers want their work published in the best journals possible, and they want it published faster and they want it made more discoverable. Thus, we continue to enhance our publishing portfolio and drive innovation throughout the publishing process. This allows us to consistently improve the impact of our journal brands and the value proposition for researchers. As part of this, we continue to reduce publishing cycle times, which increases researcher satisfaction while also improving our margins. In Academic & Professional Learning, we continue to deliver on our strategies to grow digital content and courseware focused on career-oriented disciplines and pivot to online corporate training. Education Publishing revenue was even with prior year as digital growth offset print decline, and the impact of COVID-19 on test prep. Digital content revenue rose 32% and zyBooks, our STEM courseware platform, rose 46%. Overall, we continue to gain market share in higher ed publishing, growing it from 4% in October 2018 to 5% in October 2020 on a 12-month trailing basis. Notably, fall enrollment numbers in higher education continue to be better than we had anticipated in the early days of COVID, although still down around 4% overall. In the past two years, we've been saying that our strategy to drive digital adoption would allow us to return to growth by driving significantly higher digital units from increased sell-through as we use digital courseware to recapture units that were lost to the sale of print books through non-revenue generating channels. As you can see in our strong digital growth, the strategy is working, and we'll continue to capitalize on this favorable momentum. As noted, Professional Learning continues to be adversely affected by COVID-19. Revenue was down 13% primarily due to severe limitations on in-person training. Results improved in the second quarter, as we shifted to virtual learning, grew trade publishing output and benefited from some improvement in our bookstore business. Our Dummies franchise was a bright spot this quarter with solid year-over-year growth from the publishing of timely new titles on topics such as Succeeding in a Virtual Work Environment. Overall, Academic & Professional Learning revenue declined 5%, a significant improvement over the 12% and 16% declines we saw in the prior two quarters. Adjusted EBITDA was down 10% for second quarter margin of 29%. Our strategy to help students achieve better outcomes while making education affordable and accessible is playing out in the success of our digital courseware platform, zyBooks and Knewton/Alta. We recently completed a breakthrough pilot for zyBooks at the University of Phoenix involving over 800 students. The data clearly showed that zyBooks helps students to persevere with their studies and significantly improve their performance on mid-term and final exams. This, along with an affordable price, is helping zyBooks to win large course adoptions and grow by strong double-digits. In other news, we recently announced a partnership with Southern New Hampshire University to redesign its online MBA program, which effectively removes two huge barriers for learners: cost and time to completion. Southern New Hampshire is the largest nonprofit provider of online higher education in the country with over 135,000 students. To build this program Wiley collaborated with the AICPA, the Association of Certified Public Accountants, to deliver business courses that allow learners to complete their MBA in one year and at a materially lower cost than traditional degree programs. For the second half, we expect current trends to continue, namely, the digital content and courseware will grow strongly despite online enrollment headwinds. Print books, test prep and corporate training will remain challenged by COVID-19, although corporate training will continue to recover as it transitions from in-class to virtual delivery. I am pleased to report that 84% of our corporate training sessions are now being delivered virtually, up from 20% at the same time last year. We expect our trade book sales to improve in the second half as we continue to publish more titles on high interest topics, ranging from diversity, equity and inclusion to remote learning. Finally, we anticipate profit improvement in the second half, as we realize additional business optimization savings. In Education Services, our strategies to grow online program enrollment, to sign university partnerships and to drive strong profitable growth are working. For the quarter, revenue rose 27% or 6% organically driven by a 13% growth in student enrollment. New student enrollment in our existing degree programs grew 22%, a reliable leading indicator of future revenue growth. Strong gains in our traditional tuition share programs were partially offset by lower sales of unbundled services as some clients were constrained by COVID-related budget issues. We signed full-service partnerships this quarter with the University of Montana and La Trobe University in Australia. We also signed one of our largest unbundled service partnerships-to-date with the University of Wyoming. The signing of La Trobe, one of Australia's largest universities with a total of 39,000 students, builds on our strong education publishing presence in the Australian market. The partnership will start with five graduate programs in healthcare and business administration that will launch in March. An important accomplishment, as I mentioned earlier, is that we exceeded our fiscal ’22 EBITDA margin target of 15%, with a second quarter margin of 21% and a first half margin of 17%. This milestone reflects our sharp focus on profitable growth and the optimization of the student journey from marketing to application and enrollment. We are building a balanced growth business for the long-term. Our focus on filling the IT and digital skills gap continues unabated through COVID. While hiring has been temporarily limited, corporate demand for tech talent remains higher than we originally anticipated, and we continue to fill critical roles for our blue-chip customers worldwide. As a reminder, M3 creates job-ready talent for the world's leading corporations, including Bank of America, Morgan Stanley and JP Morgan. It does so by finding, training and placing the right candidates directly into jobs with specific hard and soft skills these clients require. For the second half of the year, we anticipate strong online enrollment growth to continue and interest in online programs to remain high. We see a solid pipeline of potential new university partners and expansive opportunities inside our existing base. We feel good about the unique position we're in. No other competitor in the space has Wiley's university reach and globally respected brand. IT talent placement volume is anticipated to be steady for the balance of the year, as our corporate partners continue to build out their tech talent capacity. While M3's near-term growth prospects remain a bit muted due to COVID, the intermediate and longer-term growth opportunity remains strong. We will continue to make material strides in business optimization and education services. The student journey from lead to enrollment is a particular area of focus with the resulting lower student acquisition costs, greater lead conversions and much enhanced user experience for prospective students. We continue to invest prudently in the business to drive growth by signing new partners, launching new programs, driving online enrollment and exploiting new opportunities brought on by the accelerated shift to virtual learning. We're also continuing to expand our offerings to provide learners with a full range of outcomes-based pathways to achieve their goals. For instance, we're gaining momentum with Wiley Beyond, a strategic education platform for corporations that helps employees to earn degrees and certifications through Wiley's unmatched network. We've signed our first corporate partners and see great opportunity ahead. Wiley Beyond is another area where we are bridging education and career outcomes. I'll now pass the call over to John to take you through our financial profile, cost initiatives and full-year outlook.

Thank you, Brian. Our cash flow from operations and free cash flow were favorable to prior year by $23 million and $32 million respectively, primarily due to improved earnings, partially offset by unfavorable timing of working capital items. As a reminder, cash flow is normally a use of cash in the first half of our fiscal year due to the timing of collections for journal subscriptions, which are concentrated in the third and fourth quarters. Our strong balance sheet, consistency of annual cash flows and ample liquidity, afford us the flexibility to continue investing, acquiring and returning cash to shareholders. Capital expenditures, including technology, property and equipment and product development spending, were $47 million through the second quarter, roughly $9 million lower than prior year. We expect full year capital expenditures to be approximately $100 million with investment focused on adding and enhancing tech-enabled products and services in our core focus areas along with continued investment in process optimization and workflow automation. With respect to acquisitions, we will remain opportunistic as we look to add scale and capabilities in Research Publishing & Platforms as well as online education. Our quarter end debt balance was up $43 million compared to the same time last year, primarily due to acquisitions, while our interest expense was down $2 million benefiting from the lower interest rate environment. Our net debt-to-EBITDA ratio at quarter end was 1.9 times as compared to 1.8 times in the year-ago period. In terms of liquidity, we reported $86 million of cash on hand and we ended the quarter with undrawn capacity of $655 million. Our current dividend yield is around 4% and we expect to resume share repurchases under our existing repurchase authorizations as global economic stability returns. As Brian noted, we've been expanding and accelerating our efforts to increase operational effectiveness and efficiency in this unique period. In research, we continue to invest in our publishing operations to drive improvements in publishing cycle time and cost per article. Brian has also noted the successful launch of our AI-enabled Transfer Desk Assistant, and its immediate benefit to our article cascade strategy. In Education Publishing, we are investing in e-commerce and direct channel capabilities to take advantage of the accelerated shift to digital content and courseware. Through the half, e-commerce sales were up over 8% and now represent roughly 18% of Education Publishing revenue. In Education Services, we are further optimizing student acquisition and marketing operations, which continue to fuel our EBITDA growth there. As part of our overall business optimization program, we recorded a restructuring charge this quarter of $2 million related to severance costs. We anticipate $4 million in run-rate savings from these actions starting in fiscal ’22. We continue to generate significant COVID-related savings on travel, events and facilities expenses. We are taking actions to sustain much of these savings in our post-pandemic operations. Among these actions, we will implement a hybrid working model for many of our colleagues and reduce our real estate footprint by approximately 12%. As a result of these real estate actions, we anticipate a third quarter pre-tax charge of approximately $15 million to $20 million, yielding $7 million to $8 million in run-rate savings starting in fiscal ’22. Turning to our forecast, we are now initiating full year guidance for fiscal 2021. Although our visibility remains somewhat limited given the recent surge of COVID cases and the potential return to widespread lockdowns, we have a better handle on the challenges and opportunities triggered by the pandemic. And we have confidence in projecting our full year performance. For the full fiscal year, we expect revenue in a range of $1.865 billion to $1.885 billion, up from $1.83 billion in fiscal 2020. At the segment level, we are projecting low single-digit revenue growth in Research. Education Services will deliver double-digit revenue growth, including the inorganic contribution from our M3 acquisition and mid-single digit growth on an organic basis. Growth in Research & Education Services will more than offset a mid-single digit decline in Academic & Professional Learning. Revenue growth, business optimization gains and COVID-related savings will all contribute to improved year-over-year profit performance. We anticipate adjusted EBITDA of $380 million to $395 million, up from $356 million in fiscal 2020, and adjusted EPS of $2.50 to $2.70, up from $2.40 in the prior year. And finally, we expect free cash flow of $175 million to $200 million, up from $173 million in fiscal 2020. The anticipated cash flow improvement reflects improved earnings, partly offset by unfavorable timing of working capital items. Our full year forecast includes second half organic investments in strategic areas to fuel long-term profitable growth. The second half investment will largely be offset by business optimization and COVID-related savings. I'll now pass the call back to Brian.

Thanks, John. So, let me recap the key takeaways from our second quarter and first half. Our business remained strong, as the pandemic has accelerated trends that support the core strategy that we've been consistently pursuing: open research, online education and digital content and courseware. We're seeing significant results from our efforts to publish more in research and grow our volume-driven revenue to accelerate enrollment and profitable growth in Education Services, to return Ed Publishing to profitable growth by driving sell-through with affordable digital units and to improve margins by optimizing our structure and our processes. Clearly, we're experiencing some COVID-related disruptions to in-person training and to print book sales, but this represents an increasingly small part of Wiley. Remember that around 85% of our revenue today is generated from digital products and tech-enabled services. The year has presented numerous unexpected challenges, but Wiley performed very well during the first half of 2020. We will continue working hard to deliver strong performance for the balance of the year while taking advantage of this unique moment to accelerate our strategies and improve how we operate. Although the pandemic continues to weigh on the global economy and parts of our business, our core markets are resilient, essential and countercyclical. Our strategies in open research and online education are succeeding and prevailing trends in the market are reinforcing our direction to travel. As always, Wiley's performance is a team effort. So, I want to thank our wonderful colleagues around the world for their commitment to our mission and for their many accomplishments this quarter. And as 2020 comes to a close, I wish them all and all of you a joyful holiday season and the best of luck for a happy and healthy 2021. I'll now open the floor to any comments and questions.

At this time, if you would like to ask a question, please press star then one on your telephone keypad. Our first question comes from Daniel Moore with CJS Securities. Your line is now open.

Brian, John, good morning. Congrats on a really solid result. Thanks for taking the questions. Let me start with the online program management segment already exceeded your goal of 15% margin. Do we anticipate being able to sustain that level of profitability from here going forward? Just wondering if there's anything unusual in terms of seasonality or some of the investments in H2 might push that down before it comes back up?

Yes. I'll let John answer that after an initial comment. Basically, we set a target of 15-plus percent. We're over that now. We're very pleased and proud of that. We believe that we can operate this business consistently as we should profitably, while growing it significantly. And I think that the expectation we should have going forward is the 15-plus percent. There is definitely some seasonality and some ebbs and flows as the year goes through. So I would basically reinforce the expectation rather than setting the expectation at a significantly higher level than we've already achieved. John, do you have anything to add to that?

Very little other than to say yes, I completely agree that the year-to-date trend is a better way to think about sustainable performance. They are in line with our expectations around driving growth. So there is some seasonality. The six months' trend is a better indicator of the momentum of our business there.

Very helpful. Switching gears, talk a little bit less about it typically, but corporate and Professional Learning, wondering if you anticipate the switch to digital delivery that you've taken obviously in the midst of the pandemic, do you expect that to remain somewhat permanent and what implications might be for growth and margins longer term?

Yes, it’s a great question. In corporate, like everywhere else and we've certainly seen it in our higher ed businesses, the transition to digital teaching and learning and digital training is one that comes at the expense of some very long and well-established trends and behaviors. We were extremely positively surprised by how well we would be recovering from the initial shutdown of in-person training. It's bounced back significantly better than we thought. For example, originally we were down 70% and you can imagine, right, no in-person training means very little activity for us there. But already we're back to down 30% and that's terrific. And at this point, I believe 84% we had in the comments, are already virtual and we're getting people — partners and companies who had said they would never go to virtual are now doing virtual. So we do expect that this has allowed us, as it has across our business, to lock in the digital transition in many of the places now where teaching and learning exists. So how that translates into growth and into profitability remains to be seen. But certainly trends that you've seen elsewhere as we move through digital transition should be consistent here. So yes, we're moving faster than we thought, and we think we're locking in the gain, but I think that's what really matters here.

That's certainly helpful. Maybe one more, just in terms of cash generation. The guide, John, $175 million to $200 million, just remind us timing, magnitude of any benefit of tax deferrals from the CARES Act or if I'm getting that right? How that impacts cash flow this year? And just wondering if the $100 million CapEx is sort of the new norm? Or is that, you're sort of pulling forward some investments?

Sure. So with respect to the cash flow projection for the year, our expectations around free cash flow are primarily driven by our earnings improvement year-over-year, and we're showing some good strength there, as indicated by the full-year guides that were given. There is some adverse impact that we're anticipating with respect to working capital that's mostly due to, in some cases, elongated payment terms with certain customers, particularly on journal subscriptions. By the way, I should note that we're very pleased with our progress overall around collections. We're seeing minimal risk at this point in terms of bad debt or defaults. And so, we're making really good progress on collections. But there's some elongation that plays into our forecast for the year. The expectation with regard to the CARES Act refund is that we'll receive that refund before the end of the year. So that will play into our cash results. I would just note though that on a year-on-year basis, our cash taxes paid within that projection will be essentially flat with that refund. So it’s a neutralizing effect on cash taxes this year.

Very helpful, and I'm going to sneak one more in. Capital allocation, just given the strength of the balance sheet, results and stickiness of the business and free cash flow trends that we're seeing, clearly better-than-expected, I guess why wait for an economic recovery to be opportunistic from a share buyback perspective? Thanks again.

Dan, I would say, at this point in time, we are striking a balance between investment in the business and returning cash to shareholders, and at the same time also navigating what is somewhat of an uncertain period of time. I think we're getting closer to being on the other side of that uncertainty. And so, we continue to closely evaluate the opportunity to begin again share repurchases. But we're going to proceed with some degree of caution there, again looking for more economic stability before we go back deeply into our repurchase program.

Our next question comes from Sami Kassab with Exane BNP Paribas. Your line is now open.

Thank you and good morning, gentlemen. I have a few questions please. First on the Research division. Could you please comment on the rate of revenue growth you are seeing in open access in H1? And also, can you discuss how significant might be the risk of seeing unbundling of the big deals in the remaining 80% of your contracts that are still up for renewal? Then secondly on Higher Ed Publishing. I understand you guided for mid-single-digit decline in Academic & Professional Learning. But could you guide for any revenue growth you expect to see in Education Publishing? Is it fair to expect a return to sustainable growth going forward in that sub-segment? And lastly, on OPM. Can you please elaborate on what is driving the decrease in student acquisition costs? Are you seeing overall deflation in digital advertising price points for instance, or has it more to do with some company-specific cost actions that you're undertaking? Thank you, Brian.

Terrific, Sami, thank you very much for those questions. Our rate of growth in open access is very, very strong. John, can you give the number for the first half?

So setting aside the impact of the transitional agreements that we have underway and getting to an operational number, we're on the order of 40% growth in open access publishing.

Yes, which is exceptional growth. We're seeing very strong growth in open access, great enthusiasm for our brands. The model as you know is a price times quantity model, and it allows us to lock into endemic growth in the marketplace, where article counts tend to go up by mid-to-high single-digits every year. We were very pleased with the growth we're showing. It comes from a lot of different places. Certainly we're getting far more submissions than we had. Submissions are up in the high 20s percent and article output is up 22%. That allows us to cascade articles through our system. So yes, we are feeling very good about the strong growth in open access. With regard to the big deals, we have seen very consistent high renewals in our base of library subscription customers. As we discussed, we have some price pressure this year. We're seeing no evidence of widespread unbundling because the bundle that we provide to our institutional clients is exceptionally important and plays a very important role in the success of their institutions. Research content ends up very high on the list of things that libraries need in order to serve their institutions. So we're feeling strong and confident about that. With regard to Higher Ed, print declines have gone on for some time. As we said, digital growth is now outpacing the print decline. We're very pleased to hear that, but we do expect the print decline to continue for some time. We do expect to return that business to profitable growth. We're not providing a specific time horizon due to market uncertainties. But the strong growth that we're seeing in digital adoption and sell-through indicates the math will favor long-term improvement. We will return to sustainable growth. On OPM, our student acquisition costs have gone down because of an explicit strategy to improve the efficiency and targeting of our advertising. We're much more efficient in targeting and spend, and we are much more efficient in converting the leads we generate into students. It's been a wild ride this year due to marketplace disruption, but students remain interested in education to advance their careers. Our ability to get the right message to the right potential students, and then to convert those leads into enrolled students, demonstrates the effectiveness of our marketing and student journey optimization. There is no evidence of broad market deflation in lead costs; rather, we're just getting better at finding the right students and converting them.

This is very helpful. Thank you very much, Brian. I just don't understand why you remain conservative for Higher Ed Publishing. A bit more constructive: if we now have digital growth offsetting print decline, why would it reverse? Is print going to accelerate or is digital going to slow down? What is the uncertainty that holds you back from a more affirmative outlook now that the inflection point seems behind us?

I wouldn't necessarily say the inflection point is fully behind us. What I would say is digital is now outpacing print decline. The issue is print sales have been challenged for some time and we're looking for the bottom. We're being conservative about the timing of when we will see the full benefit. But I share your confidence. The majority of courses around the world are taught with content published by Wiley or other leading publishers. As we move from print to digital, it allows us to repatriate sales that were going through used channels, rentals, or non-revenue channels. So we are feeling good about the business. Calling the exact moment of pivot is more uncertain, which is why we are conservative on timing.

So it's not a view that Open Educational Resources might become more of a competitive pressure going forward? Your conservativeness has nothing to do with a scenario where OER were to gain more share?

No. What we have found is that as our courseware prices have become more in line with market expectations, we're gaining share, not losing share. The OER portion of the market is still relatively small today, and much OER is based upon published content. We also participate in the OER market with our platforms. So no, we don't view OER as a material threat to our business at this time.

Our next question comes from Greg Pendy with Sidoti. Your line is now open.

Just wanted to understand the free cash flow guidance a little bit more. You mentioned a Q3 charge. Is that a cash charge or a pre-tax charge on that upwards of $15 million?

The Q3 charge will be a pre-tax charge related to real estate actions, and there will be cash outlays over time related to lease and facility obligations. So it is a charge that has cash implications, but it doesn't change the momentum of cash in the short-term. The restructuring charge we recorded this quarter of $2 million was related to severance and is separate. Overall, the restructuring and real estate charge will yield ongoing run-rate savings starting in fiscal ’22.

I think so. Yes, that helps.

Your question is really specific to the restructuring charge, and more broadly, I commented earlier that we've got a few moving pieces: the working capital elements at play given the timing of collections and some impacts around COVID on extended payment terms with certain customers. So there's a bit of working capital movement, but the cash flows will be primarily driven by stronger earnings performance for the year, offset a bit by working capital. The restructuring charge doesn't have a material impact on the timing of cash flows for the year. And as I said, the tax refund we're anticipating is a neutralizing effect on cash taxes for the year as compared to prior year.

And then just, I guess on that topic, just trying to understand — I know you mentioned the extended payments for the accounts receivable. Should we be thinking about that as you've gone through 20% of the renewals? So does that stay elevated for a while as you still have to work through 80% more renewals?

No, I would not describe this as being directly tied to the progress of renewals. We're talking about extended payment terms in very limited cases, many of which are related to the timing of government funding in various countries around the globe. So it's a relatively narrow part of the population that is on extended payment terms.

Okay, great. And then just one final one, just on the inflection point, just trying to understand that in digital versus print declines, and just trying to understand how many students are potentially getting courseware bundled with their courses as they are online and may pivot back to print if classes return in-person? Is that a potential slight step back we might see? Not that the trend doesn't continue towards digital, but just trying to understand given the inflection point.

It's always a good question. Human behavior typically changes slowly, but in this case we've seen a rapid change. Students and professors adopted digital first because they had to, but now they realize it's working and that it enables much more. Typically, students buy required courseware themselves for the course — content is not usually bundled in a way that permanently removes monetization. There may be some who choose to return to print, but we typically haven't seen that. Satisfaction with digital products has been increasing and is well above 50% now. Because of that, we expect the digital adoption to be largely persistent, not reversed by a temporary return to in-person instruction.

Our next question comes from Matilda Derezano with Barclays. Your line is now open.

Hi. Thank you for taking my questions. I’ve got a couple. First, I wanted to ask whether your guidance for low-single-digits in Research for the year, given growth of 5% in the first half, means that we should expect the journal growth to decline in calendar 2021 versus calendar 2020. And then, I wanted to ask if you could give a bit more color on the pricing pressure that you are seeing in renewals: is that limited to U.S. institutions or more global? And lastly, what changed in enrollment in 2020 versus 2019? I was also asking whether you're budgeting for travel for the college textbook business? Thank you.

John, why don't you pick that up if you can? I did not get the third question clearly so we may need that repeated.

Let me respond to the first two and then we can come back for clarification on the third. We're anticipating modest growth in the Research segment in the second half compared to the second half of the prior year. So you're correct that we expect a slower rate of growth in the second half. Some of that in our forecast anticipates modest pricing pressure around subscription renewals for calendar year 2021. Again, we expect that pressure to be modest, and so far the evidence is consistent with that. Our expectation is some pressure on subscriptions and upside on open access that should roughly balance. On the geography of pricing pressure, I wouldn't say it's limited to any particular part of the globe. As we see it today, it's largely a function of the health of the university customers that are our subscribers. Those institutions with weaker overall financial positions are more challenged. So far the pricing pressure has been limited in both breadth and depth and there's no particular geography that stands out.

Yes. I was just wondering what your expectations are for 2021 enrollments and how you're planning for that for your college textbook business compared to 2020?

It's been a moving target since the beginning of the COVID crisis. Enrollment has been better than we expected with undergraduate being down a bit and graduate programs up slightly. Community colleges were hit harder, but we have limited exposure there. We haven't projected the following academic year yet; we'll come back to that as we do our outlook. We continue to note that enrollment is often countercyclical and we expect the economic effects of COVID to last for some time.

Our next question comes from Matthew Walker with Credit Suisse. Your line is now open.

I've got three questions if that's okay. The first is on open access. You've gotten very strong open access revenues. My understanding is that some of the deals you've done are like an upper and lower band of revenues that the university partners would pay, so no direct linkage to the volume of articles published beyond some cap. From what you're saying though there is a big opportunity to generate revenue from the number of articles published. Can you explain that? Second, have you seen any impact from universities using third-party consultants to help them get rid of unnecessary journals? And third, you mentioned your market share in higher education went from 4% to 5%, which is strong. That implies the market is a bit worse than your performance. What would your growth look like if you hadn't gained any share at all?

First, remember our open access growth is made up of two parts: traditional gold OA article-by-article business and the volume from our strategic transitional deals. The proportionality varies by deal. Every deal is different with different structures, so there isn't a single answer. The price-times-quantity relationship remains and plays out differently across deals and geographies. That said, the majority of our OA growth is outside the transitional deals; the transitional deals are significant but not the whole story. John, do you want to add?

I would just point out that our open access business is much larger than just the transitional deals. Those deals represent a significant element, but the majority of our open access business is outside those deals. So there is lots of opportunity to drive growth out of OA volume beyond those transitional agreements.

On the question about renewals and third-party services that help institutions tailor subscriptions, we haven't seen a material impact on our business. Libraries are smart buyers and always seek value, but usage of our content has increased, especially this year, which supports the importance of the subscriptions. Regarding market share, our pricing actions to make content more affordable have driven volume increases, which have more than offset price reductions. We've driven meaningful price points down and simplified models, and as units increase and outcomes improve, the market rewards that. We focus on indispensable content in disciplines like accounting and IT, which helps our performance. Overall, we feel we will continue to grow and perform well relative to competitors.

I think what I was trying to say is that many people say they're close to a tipping point, and individually they have gained a lot of market share, which suggests the underlying market may not be as healthy if you haven't gained any market share. Thank you.

I would argue you should study the industry statistics closely and you'll see there have been material share shifts and consistent increases in unit sales in the industry. We feel confident we will have unit growth and continue to perform well relative to competitors.

We have a follow-up question from the line of Daniel Moore with CJS Securities. Your line is now open.

Thank you. I realize you've covered a lot already. Just Ed Services, following up on the decline in marketing costs. Can you just talk briefly about the profitability curve today for a new partner institution, compared to what that was a couple of years ago? How quickly they get to breakeven and ramp to more mature levels of margins? Thank you.

So every partner is different and requires different upfront investment and has a different profile to get to maturity. Our improvements in marketing efficiency and lead conversion are helping us get partners to profitability faster. The upfront marketing investment is a big part of standing up a partner and the more efficient we are with student acquisition and conversion, the faster the portfolio performs and the faster each program becomes profitable. I won't provide specific timelines as it varies, but the direction and impact are clear.

Understood. Okay. Thank you again.

We're showing no further questions in queue at this time. I'd like to turn the call back to Mr. Napack for closing remarks.

All I'll say is thanks for joining us today, and once again, happy holidays. We look forward to talking to you around the time of our third quarter results in March.

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