Earnings Call Transcript - WLY Q1 2021

Operator, Operator

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

Brian Campbell, Vice President, Investor Relations

Thank you. Good morning, and welcome to Wiley's first quarter 2021 earnings update. On the call with me are Brian Napack, President and Chief Executive Officer; and John Kritzmacher, Chief Financial Officer. 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. 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. Please see the reconciliation of all non-GAAP measures presented in the supplementary information included in our press release. Unless otherwise noted, we will refer to non-GAAP metrics on the call, and variances are on a year-over-year basis and won't exclude the impact of currency unless otherwise specified. After the call, a copy of this presentation and a playback of the webcast will be available on our Investor Relations web page. I'll now turn the call over to Wiley's President and CEO, Brian Napack.

Brian Napack, President and Chief Executive Officer

Good morning, everyone. Right now, educators and students around the world are heading back to school and researchers are heading back into their labs in a world significantly altered by COVID-19. As they do, they're rewriting the playbooks for education and research. From our vantage point, it's clear that they're turning to digital content, platforms and services at unprecedented levels. And they're also turning to corporate partners such as Wiley, who can help them achieve their goals in a changed world. The result for Wiley is that across the company, demand for our digital products and services has grown markedly. This unusual moment is moving our markets and proving that the strategies that we have been pursuing are not only right for the market today, they are right for where the market is going in the long term. We had a solid first quarter of revenue and earnings performance despite the disrupted environment. This demonstrated both the resilience of our business and the tight alignment of our strategies with the market's evolving needs. We'll talk specifics about our performance shortly, but it's important to note that today's acute health, economic and social problems serve to reinforce the value of Wiley's mission. Over the past months, we've moved faster to validate and publish more research and have made thousands of critical COVID-related research studies freely available. We've helped many universities, schools and corporations around the world to more quickly migrate from traditional to virtual learning. And we spent lots of time in our communities, raised money for causes that address injustice and took concrete actions to ensure diversity, equity and inclusion within Wiley. We continue to be reminded of the racial inequality plaguing our society and the need for corporate citizens such as us to play an active role in dismantling it. Our global team takes great pride in the fact that their work is truly helping the world to heal, recover and thrive. Wiley today remains largely in work-from-home mode, although we have partially opened a few offices around the world, where local health conditions allow. I want to recognize the great work of our team in executing at a very high level through this challenging period. Simply stated, the team continues to deliver on our key milestones and customer commitments. In regular surveys, the vast majority of our colleagues report feeling productive and happy, and their engagement is very high. This can be attributed to our strong mission-driven culture, our tech-enabled workflows and our consistent emphasis on colleague care. The pandemic continues to disrupt the global economy, and this has directly impacted some of our more traditional revenue sources such as physical books and in-person training. But despite these focused headwinds, we're very encouraged by the underlying momentum we're seeing in Education and Research. This momentum should continue well beyond the pandemic. We’ve been talking for some time about the positive trends that are driving Research and Education. Our growth strategy is built on these trends. I'm pleased to see that they are accelerating at this moment and that Wiley is capitalizing on them. Research output is rising rapidly. Demand for online education and for the digital courseware to support it is also rising rapidly. The acceleration in these areas speaks well to our long-term outlook. Internally, we are using the moment to lean into our operational excellence. This includes a focus on improving content workflows, our customer journeys, our facilities footprint and more. John will talk about this later, but there is much we have done and much that we continue to do to improve the efficiency of operations. With that, let me summarize the first quarter's results. As I said, we continue to see COVID-related disruption to printed books and in-person training in the quarter. Offsetting that with strong growth in key strategic areas, including open access publishing, research content usage, online student enrollment and digital courseware, the net result was that revenue rose 2%. Adjusted EPS rose 124%, and adjusted EBITDA rose 42%. Organic revenue was down 1%. I'll provide more detail on all of this in our segment discussions. The material earnings improvement this quarter was primarily driven by favorable revenue performance, particularly in research, lower discretionary spending and savings from restructuring. Corporate expenses alone were down 16% or $7 million. Let's take a look at the segments. Our Research business continues to perform well. Revenue and adjusted EBITDA rose 6% and 19%, respectively. An important note is that about $4 million of our Q1 revenue came from journal subscription renewals that were delayed from Q4 due to COVID-19. That said, our strategies across the research business continue to bear fruit. Article output was up 13%. As you know, this is a key driver of our business models. It's an outcome of good market growth, our strong publishing programs and our market-friendly publishing strategies. We continue to see strong double-digit revenue growth from our open access publishing program. Our comprehensive national agreements in Europe are performing well, with publishing volumes exceeding our expectations. Usage of the Wiley Online Library is growing strongly, up 10% over the prior year. Our industry-leading society publishing program is having another great year. Net society wins will result in around $11 million of incremental publishing revenue in calendar 2021. In June, we signed a 10-year extension of our important Cochrane Library partnership. For reference, Cochrane is the world's preeminent collection of validated evidence for health care decision-makers. Our platform revenue rose 10% on new customer launches for Literatum. We continue to consolidate Literatum's industry-leading position in research content distribution. Our customer retention on a trailing 12-month basis was 98%. Finally, we expanded our partnership with AAAS, the American Association for the Advancement of Science. This is one of the world's largest scientific societies. As part of this, we'll move the full suite of content from Science, a globally celebrated family of journals, onto Literatum. This follows our recent announcement that we have also partnered with AAAS to grow their Science Careers center. I'll provide a bit of forward-looking color for each of our three segments. In Research, a strong market position and diversified revenue streams are providing a solid foundation through this time of change. Calendar 2020 subscription agreements are locked in through December of this year and our calendar 2021 renewal season just recently started. We do anticipate that COVID-related budget constraints at libraries will result in some price pressure for 2021, but it's too early to quantify. In any case, we expect to offset this pressure through the continued strong growth of open access, research platforms and corporate solutions. At the same time, we continue to enhance our end-to-end workflows to improve efficiency and enhance the value proposition for researchers. We've made very good progress already, as evidenced in our strong EBITDA performance, reduced publishing cycle times and improved researcher engagement. In summary, we're seeing strong underlying indicators of future growth and long-term customer health. In Academic and Professional Learning, or APL, the story is an interesting one. The quarter was significantly affected by COVID due to the closure of bookstores, testing centers and corporate offices. Naturally, this affected the more traditional areas of APL, such as print book publishing, test prep services and in-person corporate training. The effect was that APL revenue declined 12%, or 13% organically, and adjusted EBITDA declined 23%. But despite this short-term pressure, there's good news for the future in our KPIs. We're seeing quite positive trends in digital content and courseware, as universities and companies pivot to virtual learning. We appear to be at an inflection point for digital content and digital courseware, with record growth of 32% and 88% respectively on a pro forma basis. Our strategy to focus tightly on high-demand skills and careers is paying off. In higher ed, we are gaining market share. Our share has grown from 4% in July 2018 to nearly 5% in July 2020 on a trailing 12-month basis. Our innovative zyBooks and Alta digital offerings are winning adoptions at an impressive pace. For example, zyBooks, our STEM platform, saw revenue double over the prior year and it is winning consistently in large course adoptions. So actually, I'm feeling good about the future of APL despite this quarter’s COVID-related declines in our traditional business lines. For the remainder of the year, we expect the current trends will continue, namely that print book sales will continue to be challenged by COVID lockdowns and virtual learning. Note that print books represent a smaller portion of Wiley's overall business. Digital content and courseware will continue to grow strongly, helping to mitigate any potential decline this fall in higher ed enrollment. Recovery in test prep will be dependent on the reopening of testing sites and the resumption of certification exams. In corporate learning, we're seeing an acceleration of our virtual and hybrid corporate training products. We anticipate a strong post-pandemic recovery, based upon what we are seeing in platform usage and new partner signings. Throughout APL, we're moving quickly to take advantage of the abrupt shift to digital learning by investing in our platforms and our go-to-market strategy. This includes our value-driven business models that make content affordable. An example is our inclusive access program, which continues to grow very strongly. We are also responding to the moment by publishing timely titles on topics such as running businesses virtually and creating diverse, inclusive and equitable cultures. Finally, we're driving rapid and significant improvement in our cost structure to improve efficiency and our margin profile. Our Education Services segment is positioned very well for this moment as universities, students and professionals are pivoting hard to both digital learning and online degrees. It will take time to fully realize the potential of this shift, but interest in our services, which help universities to succeed with online education, is running very high. For the quarter, revenue was up 29% or 4% organically, and our EBITDA margin was 13%, which is up 9 percentage points versus fiscal 2020. Revenue growth was driven by $12 million of inorganic contribution from M3, as well as 9% growth in student enrollment. Our mature and new programs are performing well, although organic growth was offset by small partner terminations as part of our continuous portfolio optimization. Our full-service partner count now stands at 67. We added two new full-service university partners in the quarter, the University of New Haven in Connecticut and Carlow University in Pennsylvania, and we signed additional universities for unbundled service agreements. Online program enrollment was very healthy this summer and remains so as we enter the fall semester. At M3, we found the corporate demand for trained IT talent to be more stable in the pandemic than we had expected. Our existing customer base is solid, and we've begun placing new talent at several recently signed customers. Notably, we're gaining momentum in India, where we are currently staffing a major new technology center for one of our global financial services clients. University services are facing significant pressures this year, as universities simultaneously shift to hybrid and virtual learning while also dealing with financial shortfalls brought on by COVID-related enrollment declines. Although intermediate and long-term trends are very good, there is some near-term uncertainty to manage through with our clients. As with digital courseware, online education is now past the inflection point and is broadly adopted and accepted as a mainstream way to get a degree or certification. This was true before COVID, but the disruption of the past six months has driven home the value of high-quality, fairly priced education that can fit the life and career needs of the broad public. This moment is reflected in enrollment trends and a good pipeline of potential university partnerships, both in the U.S. and abroad, with our key partners, most of whom are evaluating online expansion opportunities. M3's IT talent placement volume is anticipated to be steady for the balance of the year as our corporate partners continue to maintain and grow their tech talent capacity. Major operational focus within Education Services is the continued improvement of the student journey from lead to enrollment. These efforts continue to bear fruit in higher conversion rates and lower student acquisition costs. The business is well on track to realize its fiscal 2022 goal of a 15% EBITDA margin. I'll now pass the call over to John to take you through our financial profile and optimization initiatives.

John Kritzmacher, Chief Financial Officer

Thank you, Brian. Despite a very challenging environment, we are generally pleased with our revenue and earnings performance for this quarter. That said, our cash flow from operations and free cash flow were unfavorable to prior year by $27 million and $20 million, respectively, primarily due to the timing of changes in working capital. As a reminder, our cash flow is normally the use of cash in the first half of our fiscal year due to the timing of collection for general subscriptions, which are concentrated in the third and fourth quarters. Capital expenditures, including technology, property and equipment and product development spending, declined $6 million to $24 million for the quarter. As discussed on the last earnings call, we expect full year capital expenditures to be approximately $100 million, with investment focused on new product and service capabilities as well as process redesign and workflow automation. With respect to investment in acquisitions, we will remain opportunistic and continue our pursuit of attractive opportunities to add scale and provide enhanced tech-enabled products and services in both research and online education. In terms of our balance sheet, our quarter end debt balance was up $117 million, primarily due to acquisitions. But our interest expense was lower by $1.5 million, as we realized the benefit of the lower interest rate environment. Our leverage ratio at quarter end was 2.0 times, inclusive of all acquisitions. In terms of access to capital, we recorded $101 million of cash on hand, and we ended the quarter with undrawn revolving credit of $650 million. 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. In June, the company modestly increased its quarterly dividend for the 27th consecutive year. Our current dividend yield is more than 4%. As a reminder, due to the economic downturn, we have refrained from repurchasing shares. We remain fully confident in our continued strategic momentum, cash generation and liquidity position, and we expect to resume share repurchases as the economic environment recovers. We are moving quickly on cost reduction and efficiency initiatives to mitigate the adverse impacts of the economic downturn and improve our agility and efficiency. These programs are company-wide and include optimizing our content development workflows, streamlining our customer support operations and achieving benchmark efficiency levels for corporate support functions, such as HR and finance. Meanwhile, we continue to maintain tight controls on discretionary spending across the company, and we have realized significant savings on travel, marketing events and professional fees. In addition, hiring and salary increases have been strictly limited to critical business needs and investment in our top performers. And in June, the executive leadership team and the Board unanimously agreed to take six-month pay cuts ranging from 15% to 30%. And as you may recall, in the fourth quarter of fiscal 2020, we recorded a $15 million restructuring charge for actions that will generate annual run-rate savings of approximately $30 million. Additional cost savings actions are anticipated in the current fiscal year. As an example, we are taking actions to rationalize our real estate portfolio given our successful transition to a virtual work environment. We will update you on our progress and the anticipated savings we will make throughout the year. In summary, we are very well positioned to navigate the COVID-related challenges ahead, while investing in key optimization and growth initiatives. As a reminder, given our limited visibility in the current economic environment, we have suspended our practice of providing annual guidance. We expect to return to providing guidance when the economic environment becomes more stable and our visibility improves. I'll now pass the call back to Brian.

Brian Napack, President and Chief Executive Officer

Thanks, John. So, to recap the main messages for today. Our business remains strong through the pandemic, with good momentum continuing in both Research and Education Services. We're experiencing COVID-related disruptions to print books and in-person training. Of course, this represents a smaller part of Wiley today with nearly 80% of our revenue coming from digital products and tech-enabled services. Core trends remain favorable in Wiley's key strategic areas of focus, such as peer-reviewed research, online education, digital content and courseware. We're taking full advantage of this unusual moment to drive improvement in the cost structure and core functions of Wiley, focusing on high-potential areas, such as our content development workflows, our management of the customer life cycle and the tuning of our real estate footprint for an increasingly virtual workforce. Overall, we're confident in the enduring importance of our Research and Education content, platforms and services. But more importantly, we're optimistic that at this challenging moment we're seeing compelling evidence in our KPIs that our markets are strong and our strategies are working. To be specific, we're experiencing strong growth in demand to publish in our journals and consumer research; strong growth in Research platform signings, recurring revenue and content consumption with 98% client retention; strong growth in our digital courseware portfolio; strong growth in enrollment at our online degree programs; and increased interest of universities in accelerating the transition to online education. So despite some near-term headwinds, the data tells me that we're tightly aligned with the current and long-term needs of our customers: the researchers, students, professors, administrators and corporate leaders that we serve worldwide. Once again, I want to thank our wonderful Wiley colleagues around the world for their grit, their positive spirit and their remarkable accomplishments this quarter. With that, I'll open the floor to your comments and questions.

Operator, Operator

(Operator provided instructions on how to ask a question.) Our first question comes from Daniel Moore with CJS Securities.

Daniel Moore, Analyst (CJS Securities)

Brian, John, good morning. Thanks for taking the questions. I wanted to start with Research. Obviously, a really solid growth in a difficult environment. How much of the jump in article output and content consumption would you contribute to COVID-related research? And as a follow-up, how much of the jump in research revenue and EBITDA reflects things like reprints and backfiles, open access? Just trying to get a sense for that relative to maybe the kind of legacy Research business, if you will?

Brian Napack, President and Chief Executive Officer

Yes. I'll start, and John can chip in. So we're definitely seeing good momentum in Research publishing. The COVID crisis has definitely increased the interest in and the output of researchers, and we see no signs of that declining. With respect to specific COVID-related research, we certainly are publishing more COVID-related papers as you would expect, but as a percentage of our total, it's a very small percentage. It's really a much broader increase in demand that we're seeing at this point in time that's coming across the portfolio. And to answer your second question, a large portion of that is coming in open access. So we're seeing really good growth rates in our open access pay-to-publish models, which as you know is a price times quantity model, so when that happens that translates directly into our revenue base. So we're definitely feeling consistent and increasing demand and the practices that we've taken in the marketplace, which have been very market-friendly. We believe those are leading researchers to choose Wiley and choose our journals.

Daniel Moore, Analyst (CJS Securities)

Indeed, and is it more article output from the same customers or more interest from new parties? How would you weigh those two?

Brian Napack, President and Chief Executive Officer

Well, in open access, the researchers themselves are deciding where to submit their articles, and as they do, they are choosing the titles, meaning the journal titles and the publishers that they want to work with. So increasingly, it's almost a B2C model in that case, and so things like the reputation, the quality of the customer experience—the research experience as they go through the publishing process—the speed with which the article gets out, and the quality with which it gets promoted are what drives that. We believe that we're seeing researchers choose us, quite simply stated.

Daniel Moore, Analyst (CJS Securities)

No, that helps absolutely. Maybe one or two quick follow-ups. Given the growth in OA, if we were to break down research between kind of annual contract revenue versus more variable or consumption-based, what would that look like at this stage percentage-wise?

John Kritzmacher, Chief Financial Officer

I'll answer this in a way that is also responsive to your question about the composition of revenue in the quarter. Roughly speaking, about 80% of our revenue comes from the combination of subscriptions and open access, and within that call it roughly 70% of our research publishing business is subscription and about 10% is open access. The remaining 20% of our business is largely products and services that are derivatives of articles that are published under subscription, such as reprints and corporate advertising. So that's roughly the split of revenue that we have today. And, of course, the subscription basis is largely contracted, right? So that's well in play, but we're coming up on a renewal season. You asked whether there were significant backfile revenues or such in the quarter and the answer to that is no. This was a pretty normal quarter for us in terms of the composition of products and services that drove our revenue.

Daniel Moore, Analyst (CJS Securities)

That's helpful because that can be really high margin. One more and I'll jump out. But you alluded, Brian, to the extraordinary pressures that universities will be facing. Given where the stock is and has been trading, I think there's a lot more fear out there than may or may not be warranted, and I know you don't want to get into guidance. But when you think about Research, is there a range—one, how are those initial dialogues going for calendar 2021? And two, is there a range of revenue growth that you might be able to provide at an extreme high, extreme low bracket to sort of rein in some of the fears out there? Maybe it's too early, but I thought I'd give you the opportunity. Thank you.

Brian Napack, President and Chief Executive Officer

Yes. It's a completely fair question, and it's what we want to know as well. We're talking to our customers very, very closely and trying to get a sense of it. But it's really early in the renewal season. So it's too early to tell. We do expect some price pressure. But we expect that price pressure should be offset by this strong growth that you're seeing in open access and in platforms and other areas. So the simple answer is it's too early to tell, but we believe that the price pressure we face will be modest, and that it will be largely offset, if not more than offset, by our open access growth.

Daniel Moore, Analyst (CJS Securities)

Okay. Helpful. I'll jump back in queue if any follow-up. Thank you.

Operator, Operator

Our next question comes from Drew Crum with Stifel.

Drew Crum, Analyst (Stifel)

Hey, guys. Good morning. So Brian, historically, when GDP has fallen and unemployment has risen, enrollment trends have accelerated. Listening to your preamble, it doesn't sound like that's what you're seeing or anticipating for the fall semester, but just want to get more detail around that. And then on a related note, the 4% organic growth for Education Services that you reported in the quarter— is that indicative of what we should anticipate for the balance of fiscal 2021? And then I have a follow-up. Thanks.

Brian Napack, President and Chief Executive Officer

Got it. So from the perspective of the demand patterns in higher ed, there is a relationship between GDP, unemployment and college enrollment. Historically, that relationship has a bit of a lag, a 12- to 18-month lag. We do expect that to play out here, and we believe we're already seeing it in our leads and our interest in enrollment. But what's happening now is different. What's happening now is literally a practical preclusion on universities from running schools as they normally have and a downward pressure on enrollment that's come from health concerns about being in large groups of people. So what we're seeing in enrollment pressure is not the inverse relationship of the historical pattern; it's a novel pressure. That novel pressure was expected in the fall to be in the neighborhood of 10% or 15%; we think it could be on the lower end of that. But from Wiley's perspective—this is really important—our strategic growth areas are digital courseware and online education, and those run counter to the trends that we're seeing in the market. Because if you can't go to school in person, you go online, or if you're usually in a classroom but now you're studying from home in a virtual environment, you have no choice but to get the digital materials. You can't share; a physical book is not going to help because you need the courseware. So that is contributing to an upswell in the parts of the business that we are strategically focused on. Both in the services business, where we're focused on online enrollment, and in the courseware business where we're focused on digital content and courseware, we actually believe that this is a material change that will have a long-term benefit for the business. Results are backward-looking, and in the spring we definitely saw some shock to the system from COVID that affected enrollments. Over the summer, we started to see elevated levels of interest in lead generation and in conversion, leading to pretty good enrollment trends. So our enrollment actually was up around 9% recently, and we should see some of that continue. But again, we're just getting into the semester. We'll see exactly how this start goes, so we're not at all pessimistic; quite the contrary. We're optimistic about where that business is going and the enrollment trends due to the short-term shift to online translating into greater acceptance of online learning, which in many cases is now the norm for a large portion of people getting post-secondary education. Finally, we expect a significant, economically driven increase in interest in education due to the inverse relationship you identified before between the economy and enrollment.

Drew Crum, Analyst (Stifel)

Got it. Okay. Very helpful. And then, I know you spent a lot of time talking about Open Access and it obviously had a very good quarter—just any updated thoughts around the sustainability of that growth? And then, separately, John, can you address the timing-related working capital issues that impacted your cash flow during the quarter? Thanks.

Brian Napack, President and Chief Executive Officer

I'll pick up the Open Access question first. Long before COVID, we were seeing significantly greater volumes of submissions and consequent volumes of output. That increase has continued through COVID. We see no reason to believe it will not continue. There might be a slight elevation now that's related to researchers being at home and finishing up papers. You might expect that to have been done already, and yet the elevated levels continue and are increasing. So we're very bullish on those volume levels continuing on a go-forward basis.

John Kritzmacher, Chief Financial Officer

And then, Drew, on your question with respect to cash flow and the impact of working capital that I referenced, which were the biggest drivers: we had very strong performance in the quarter from a real earnings growth perspective, but working capital played against us. In particular, our cash collections associated with journals were pretty strong and in line with our expectations. We do have some customers that have requested extended terms, but it's not a material impact to our results. The most significant impact on the timing of working capital has to do with payables. In late March and April, like others, we went into a bit of a cash conservation mode given potential risks around liquidity in the market at that point in time. So we put some pressure on payables at that time. Then as things began to ease up in our first quarter, we eased up on payables. So the ground that we gave up on cash flow in the quarter is particularly concentrated around payables, and it's just the normal flow back to a balance after conserving cash at the end of the fourth quarter.

Drew Crum, Analyst (Stifel)

Okay. All right, guys, appreciate it. Thank you.

Brian Napack, President and Chief Executive Officer

Thank you.

John Kritzmacher, Chief Financial Officer

Thanks, Drew.

Operator, Operator

Our next question comes from Sami Kassab with Exane.

Sami Kassab, Analyst (Exane)

Good morning, Brian. Good morning, John. Thanks for taking my questions. I have three of them, please. The first one is on a topic that I think you've just touched on, but I would like you to perhaps elaborate a little bit more. On open access, what's the risk that the elevated levels of submissions that we've seen actually reflect the fact that scientists have been locked down at home and away from their labs and had a lot of time to write papers, but had no ability to make progress on their scientific research, and that those three, four months will actually, six months or 12 months down the road, lead to a slowdown in open access growth as science did not really happen for the lockdowns? Secondly, on China, we've seen the Chinese government communicate new research appraisal policies, pushing Chinese scientists to publish more into Chinese local-language journals, capitalizing local APCs, moving away from challenges like we see. Do you think the China policy and regulatory changes may have an impact? Or is that too small to matter? Is that something big on your radar screen? And lastly, can you elaborate a bit on how you see the regulatory environment in OPM? We've had the likes of hearings and scrutiny of OPMs—do you think the regulatory environment could be at risk of changing? Or do you think it's a solid regime that you have today? Do you have major concerns on the regulatory front for OPM? Thank you, gentlemen.

Brian Napack, President and Chief Executive Officer

Thank you very much for asking three very good questions. I'll take them one at a time. On the risk that the elevated level of open access submissions reflects researchers being at home and that it could snap back later: we are now six or more months into this pandemic. We continue to see elevated levels. We continue to see researchers putting out papers. Researchers are going back into the labs, absolutely. We expect elevated levels to continue at some level. Could it come back a bit? Of course, it could. But I will remind you that trends in research are very positive with overall increasing volume of output in the marketplace. We see mid- to high-single-digit increases in the volume of papers every year, and we expect that to continue. Research continues to be funded at a high level in many countries. So while there could be a temporary artificial increase, those increases have continued for some time now. Finally, our publishing program and approach are researcher- and market-friendly, and we think we're getting more than our fair share of submissions. Of all the submissions we get, we publish a small portion, so there's increasing potential. I don't see a snapback that would go the wrong way for us. On China: China is a super important market in the future of research. China is an important producer and consumer of research and represents around 5% of our research publishing business today. From a business perspective, it's not going to swing us one way or the other in any given quarter, but it's very important in the long run. Discussions in China about indigenous publishing are important trends. We have very close relationships in China and strong connections to government agencies there, and we continue to stay very close. Chinese researchers generally want their work in the best journals in the world for recognition, and we believe our publishing portfolio positions us well. While policy discussions in China are noteworthy, we believe we are well positioned to capitalize on continued growth in Chinese publishing and consumption. On unbundling and whether we see a trend as universities face pressure: universities are certainly looking for ways to save costs. We can't comment specifically on the extent of pricing pressure yet, but we don't see substantial evidence of universities saying they don't need the content or that researchers don't need it. Academics build their careers on research, and universities' rankings are influenced by their research output and quality. So while we may see some one-off cases, we don't see evidence of a large-scale trend toward unbundling. Finally, on OPM and regulatory scrutiny: the conversation about OPMs and revenue share has been ongoing for a long time. We have excellent, long-term relationships with our university partners, and we help them succeed by providing high-quality programs, attracting students and achieving strong completion rates—often higher than on-ground programs. Our clients seem to be satisfied; we have market-friendly practices such as bundled revenue share and fee-for-service models. We participate closely in discussions in Washington and elsewhere about the future of higher ed and service-provider relationships. We've responded to inquiries and expect these discussions to continue, but we are confident in our position and the quality and value of the services we provide. We will adapt to whatever the market and regulators decide, and we do not view it as a major threat today.

Sami Kassab, Analyst (Exane)

This is fantastic and very convincing. Thank you, Brian. You said in your opening remark that you had higher completion rates—did you mean that your OPM programs have higher completion rates than equivalent on-campus programs?

Brian Napack, President and Chief Executive Officer

Typically speaking, our programs have very high completion rates for the students that start them and those that complete the program. Historically, when the industry has come under pressure, it has been for providers that have had extremely low completion rates—students started but never finished and therefore never got value for the education they paid for or that the government or taxpayer paid for. That is absolutely not the case in our programs. Completion rates are extremely high, our clients are happy with them, and students are achieving career outcomes that perpetuate demand for the product.

Sami Kassab, Analyst (Exane)

Excellent. Thank you very much for all the time you've given me. Thank you, Brian.

Operator, Operator

Our next question comes from Brett Reiss with Janney Montgomery Scott.

Brett Reiss, Analyst (Janney Montgomery Scott)

Good morning, gentlemen. Prior to COVID rearing its ugly head, margins were eroding. Was that from your conversion from hard copy to digital? Or did it relate to state cutbacks in education?

Brian Napack, President and Chief Executive Officer

John, do you want to pick that up?

John Kritzmacher, Chief Financial Officer

Looking back over fiscal year 2020, we did see some erosion of our margin. The most significant drivers behind that erosion were twofold. One was the rapid continued decline of print, which historically has reasonably good margins; that rate of decline accelerated in the past fiscal year and had an impact on our bottom line. We're taking actions to improve the profitability of that business by focusing our future on digital courseware and digital content. The second factor was an increased component of our revenue coming from the OPM business, and in its current state operating margins are lower. But we've been balancing top-line growth with improving profitability and have said we would drive that business to a 15% EBITDA margin by fiscal 2022, and we're well on the march to get there. Those are the two factors putting pressure on our blended margin, and both are being addressed.

Brett Reiss, Analyst (Janney Montgomery Scott)

If going forward there are continued high levels of unemployment, is that a tailwind such that enrollments in school tend to go up in that macroeconomic environment?

Brian Napack, President and Chief Executive Officer

There is a long-established pattern that when the economy goes down and unemployment goes up, people go back to school. That relationship typically lags by 12 to 18 months, and we expect to see it. But we also have other tailwinds now: the inability to attend school in person is driving elevated interest in online education and digital courseware. As I indicated earlier, digital courseware is seeing record increases in usage and adoption because if you're not in a physical setting, you need a platform where teachers can make assignments, students can complete work, and content is delivered predictably. Physical books don't do all those things. We believe these are accelerations of long-term trends and that they are aligned with our strategy. It's gratifying to see them come to fruition at a time when the world needs both education and research more than ever.

Brett Reiss, Analyst (Janney Montgomery Scott)

Great. Thank you for taking my questions. I appreciate it.

Brian Napack, President and Chief Executive Officer

Absolutely.

Operator, Operator

And I'm not showing any further questions at this time. I'd like to turn the call back over to our hosts for any closing remarks.

Brian Napack, President and Chief Executive Officer

Yes, that's me, the host. Thank you very much all for joining us today, and we'll look forward to reviewing our second quarter results in December. Wish you all good luck and good health, and we'll see you soon.

Operator, Operator

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.