Earnings Call Transcript - WLY Q4 2022

Operator, Operator

Good morning and welcome to Wiley's Fourth Quarter and Fiscal 2022 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.

Brian Campbell, Vice President of Investor Relations

Hello, everyone. Just 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 the presentation and a playback of the webcast will be available on our Investor Relations web page at investors.wiley.com. I'll now turn the call over to Wiley's President and CEO, Brian Napack.

Brian Napack, President and CEO

Good morning and thanks for joining us. I'm pleased to report that in fiscal year '22, the Wiley team delivered another year of revenue and earnings growth with continuing strong free cash flow. As a reminder, this year marked Wiley's 215th anniversary. And to mark the occasion, we surpassed $2 billion in annual revenue for the first time. What began in 1807 as a print shop in Lower Manhattan is now one of America's oldest public companies, standing out as a global leader in scientific research and career-connected education. Our legacy is more than just a narrative. The Wiley brand is respected worldwide and our reputation is a unique advantage that helps us to win and retain customers, partners, authors, and great talent across all of our lines of business. Wiley has been unlocking human potential by advancing knowledge for over two centuries and it has done so through many economic cycles and periods of disruption. In good times and bad, Wiley delivers consistent financial performance by serving the world's researchers and learners. Today, we are growing well based upon our strong competitive position, must-have products, a strong balance sheet, and consistent cash flow. Wiley's revenue is now 83% digital and tech-enabled and 58% of our revenue is recurring. We have delivered 28 consecutive years of dividend increases. And we've recently been named the most trusted company in media according to a survey by Newsweek. All of this underscores the fact that Wiley is a strong and special company and I'm proud to be part of it, especially now. As you know, Wiley is a critical player in the global knowledge ecosystem, performing essential roles in scientific research and education. Our strategy remains to lead the market by addressing two very strong trends. The first is the rapid growth of open scientific research which is creating significant demand for our branded research content and our cutting-edge research platforms and services. The second trend is the global drive to make education more career-connected and vastly more accessible. This economic imperative is increasing demand for our learning programs and our talent development services that directly connect education with employment and that helped to fill the global talent gap. In Research, Wiley is both a leading publisher with 1,900 valuable, respected journal brands and a leading provider of essential platforms and services that help societies, publishers, and corporations to thrive in the complex, open knowledge ecosystem. In Education, Wiley delivers both powerful learning products in the form of digital content and courseware and tech-enabled services in the form of degree programs, certifications, and on-the-job training. These products and services help universities to deliver career-connected degrees and drive enrollment, help corporations to build the workforces they need to win, and ultimately helps learners and professionals to build the skills they need to achieve long-term career success. In fiscal '22, the complex global environment delivered us some unusual challenges. Most significantly, we saw post-lockdown enrollment softness in universities affect demand for our Education programs. We also saw an unusually tight labor market and rising inflation put some pressure on compensation levels. And we saw some geopolitical issues introduce instability into global markets. But despite all this, the Wiley team was able to deliver on our outlook for both revenue and earnings and exceed our outlook for cash flow. We saw an acceleration of organic revenue growth in fiscal '22 into the mid-single digits. All three Wiley segments were up over the prior year. As noted, we did run into some challenges stemming from some unusual lower university enrollment patterns. But while our university services and education publishing lines were slowed by this, we still delivered on our financial targets, thanks to strong organic growth across Research and in corporate talent development and Professional Learning. On the profit side, adjusted EBITDA and adjusted EPS rose 3% and 4%, with revenue performance partially offset by investments in growth and optimization initiatives. Notably, since fiscal '20, Wiley has executed its strategic plans very effectively, allowing us to succeed through the COVID lockdown period. The net result is two-year CAGRs for revenue, EPS, and free cash flow of 7%, 12%, and 14%. That said, as we know, the macroeconomic environment is presenting uncertainty. Wiley and its markets tend to hold up well in economic downturns, thanks to the essential nature of research and our role in it. And thanks to the countercyclical nature of higher education enrollment. Nonetheless, we are watching conditions very closely, carefully managing risk and keeping our powder dry to ensure that we can adapt to events as they unfold. Let's take a look at how we executed on our stated plans this past year. At this time last year, we laid out four commitments for Research. We said we would publish more, a simple statement but that's what the world wants and that's what drives our success. We said we would integrate and drive synergies from Hindawi, the leading OA publisher we acquired in fiscal '21. We said we would scale the platform and service offerings for our partners in the research ecosystem. And finally, we said we would increase the productivity and efficiency of our publishing operations. I'm pleased to report that we executed each of these four imperatives well and the results speak for themselves. We published more, growing article output by 7%, while organic output was down from last year's 15% COVID-induced surge, the two-year trend line was positive compounding at 6%. We expect year-over-year organic output growth to resume in fiscal '23. Hindawi performed at a very high level this year, delivering strong double-digit organic revenue growth and 36% article output growth on a pro forma basis and has achieved this with exceptional margins. We have now completed the integration and we are benefiting significantly from Hindawi's industry-leading open publishing practices and its highly efficient systems. As planned, we scaled our Research Solutions business. We signed up 36 new partners, bringing us to over 450 society and corporate customers taking advantage of our broad range of essential research platforms and services. We see lots of opportunity for upselling and cross-selling to increase lifetime customer value. Critically, 16% of our solutions customers now subscribe to more than one of our services and 4% subscribe to more than two. We are now seeing increasing LTV as we continue to expand our long-standing client relationships. Finally, we entered fiscal '22 with the intention of driving automation, intelligence, and efficiency across the research publishing process. We're making good progress across our most critical productivity metrics, such as the referral rate of rejected articles from one Wiley journal to another and the reduction of the article cycle time from acceptance to publication, both of which benefit our researchers while delivering more revenue and profit to Wiley. Notably, over 50% of our rejected authors are now offered another Wiley option to publish. This is up from 33% in fiscal '21. This is facilitated by a highly automated intelligent process. As you know, Wiley does not publish 70% of the articles we receive, much of it due to improper fit with the journal to which it is first submitted. Capitalizing on this opportunity across our full 1,900 journal portfolio will take time but we're making very good progress. So we are executing our plans in research and performing very well. Despite the world's uncertainties, Wiley Research remains a very strong business with a good growth trajectory, strategic momentum, and a recession-tolerant profile. Scientific and technical research is driven by an ever-increasing global R&D spend. Since 2000, through multiple recessions global R&D has more than tripled to $2.4 trillion. Now to the achievement of our fiscal '22 commitments in Education. As a reminder, demand for online education and digital courseware was significantly amplified in fiscal '21 as COVID drove record numbers of students into digital settings. In fiscal '22, there was a natural reversion in online enrollment. This snapback was accompanied by an unusually strong labor market that enticed many students to forgo school for opportunities in the workforce. The net result was a challenging enrollment cycle across higher education. A recent report showed that total university enrollment was down over 4% this spring after declining 3% in the fall. This variability weighed on our university services and education publishing lines which saw declines this year of 1% and 4%. Despite the challenge of this moment, our mid- to long-term outlook for higher education and digital education, in particular, remains very positive. We study this market very closely and we see long-term underlying growth in demand for online higher education, digital curriculum, and importantly, corporate talent development, where we are expanding and where enduring skill and talent gaps will continue to drive growth. Wiley is well prepared to capitalize on these significant opportunities due to the consistent execution of our strategic plans. To that end, we made a set of commitments a year ago in Education. These were to expand online programs and drive online enrollment, to expand student acquisition capabilities, to scale digital content and courseware, and to expand our corporate talent development relationships. In University Services, we signed up five full-service partners in fiscal '22, offsetting three non-renewing partners for a total partner count of 68. We also added 81 new degree and certification programs in high-demand fields such as business, health care, computer science, and engineering. This is far ahead of the 40-plus programs we signed up in fiscal '21 and is well aligned with our disciplined approach to focusing on high-demand careers and disciplines. And while enrollment slowed across the market, Wiley improved our ability to compete in the market for students by significantly expanding our proprietary student acquisition capabilities. In short, the ability to efficiently attract and enroll students is the defining capability that drives university success. And this is their single biggest challenge. The acquisition of XYZ Media, a clear leader in student marketing made Wiley a leader in what matters most, driving enrollment. And this proprietary capability is now allowing us to do so at a lower cost per student, thus driving both growth and profitability. In Education content and courseware, we saw a healthy growth in digital content and zyBooks courseware, although these gains were offset by declines in print course material and of course, we're on legacy platforms. zyBooks continues to be a very good story for us with adoptions now in over 900 institutions, revenue growth of 15%. Wiley's corporate talent development line had a huge year in fiscal '22 with record placements and over 70% revenue growth. We signed 19 new global clients, expanding into new industry verticals such as technology and consumer goods and launched an upskilling program that will significantly increase the lifetime value of our clients. Corporate talent development has become a major growth driver for Wiley. Note that we recently branded our talent development platform from three to Wiley Edge. The name not only leverages the strong Wiley brand, it also says what we do for our partners and for emerging talent everywhere. We give them a meaningful edge in a hypercompetitive world. Wiley continues to drive real-world impact through our core business activities in Research and Education and we're always focused on increasing this impact. In January '21, we signed the UN Global Compact, a pledge to drive business action in support of achieving 17 UN Sustainable Development goals. We continue to pursue these critical goals by simply doing what we do best, enabling discovery, powering education, and shaping workforces. Through our leadership in open research, Wiley is delivering more brand new knowledge to the world faster, fulfilling many UN sustainable development goals, including good health and well-being and climate action. In career-connected education, we are actively improving access to high-impact learning and good jobs. In fact, over 50% of our IT placement candidates in Canada, U.S. and U.K. now come from underrepresented populations. In India, for example, we are delivering impact to at-risk groups such as those from households earning less than $500 a month. Nearly half of our career credential candidates in India are women. In this way, Wiley is working to fulfill UN sustainable development goals for both quality education and reduced inequalities. We continue to make material progress in our corporate ESG efforts. We set out to be a carbon-neutral certified company across our global operations again this year and we achieved it. More importantly, we are rapidly advancing towards science-based targets which will provide us with a clear route to reduce greenhouse gas emissions and our carbon footprint. All of this is to say that at Wiley, we take our commitment to positive impact very seriously and that we are making very good progress. With that, I'll pass the call over to Christina to take you through our Q4 results, our segment performance, our financial position, and our outlook for fiscal '23.

Christina Van Tassell, Chief Financial Officer

Thank you, Brian, and good morning, everyone. I want to start by acknowledging the Wiley team for delivering another solid year overall. First, let's talk about Q4. Note that all variances exclude currency impact. For the quarter, Wiley delivered revenue growth of 4% or 2% organic, with continued momentum in Research and corporate talent development. This offset market-driven declines in University Services, Education Publishing, and Professional Publishing. Adjusted EBITDA was flat to prior year, and adjusted EPS was down 6%, mainly due to the revenue decline in Academic & Professional Learning, or APL, and planned second half investments in key growth areas. Before I dive into our market performance, I want to comment on our current macroeconomic conditions and geopolitical uncertainties and how they relate to Wiley. As a reminder, both Russia and Ukraine are very small markets for us, so we do not expect any material revenue impact from the crisis. Wiley does have a technology development center in Russia, one of several around the world, and we've exercised contingency plans to ensure business continuity. With regard to inflation, I would expect wage pressure in fiscal year '23 and some inflationary pressure on print publishing costs, both of which are reflected in our outlook. In terms of other supply chain issues, none have yet to be material and are largely digital in nature and limits any significant impact. As a reminder, physical products make up only about 17% of revenue. We are also closely monitoring inflationary impacts on consumer spending which would impact more discretionary parts of our business such as professional books. As Brian noted, historically speaking, Wiley has held up well through difficult economic periods. This is because we're at the center of the global research ecosystem, delivering must-have content and platforms. And while we're currently working through enrollment challenges, in general, the education sector is countercyclical in times of market contraction. Nonetheless, in this period of economic uncertainty, we will be nimble, prudent, and highly disciplined to maximize our resiliency. Now on to our segments. Note that beginning in Q1, we will be changing our Research segment reporting to reflect both Research Publishing which will account for 85% of the segment and Research Solutions which will account for 15%. Research Solutions will include platforms, corporate solutions, and services for societies and other publishers. It will replace the current platform's reporting line. For the year, Research continued to deliver consistent revenue and profit growth, with revenue up 9% or 5% organic and adjusted EBITDA up 10%. Our EBITDA margin was 35% and is in line with prior year. Performance was driven by solid growth in both Publishing and Solutions. For the quarter, revenue rose 8% or 6% organic and adjusted EBITDA was up 12%. In fiscal '22, strong momentum continued for our transformational read and published models, with 27 major signings with large university consortia around the world. As a reminder, these multiyear agreements will continue to replace our legacy read-only subscription deals which were limited from a growth perspective. Brian discussed article output, so I won't repeat it here, except to highlight that we expect to resume our historical trend line of steady overall output growth in fiscal '23. Finally, Research Solutions continues to see strong demand with platform revenues up 27% for the year or 8% organic and Corporate Solutions up 17%. On the corporate side, advertising, career centers, and spectral databases were all up 20% for the year. In summary, we continue to see strong momentum across Research. This is reflected in our consistent operating performance and in the continued success of our profitable growth strategies. On to APL; revenue in the segment was up 1% this year with growth in professional learning offsetting a decline in Education Publishing. Adjusted EBITDA was up 10% due to revenue mix and lower employee costs for a full year EBITDA margin of 28%. That's up from 26% in the prior year. For the quarter, revenue and adjusted EBITDA were down 5% and 3%, mainly due to difficult market conditions. Within this segment, as discussed, Ed Publishing performance continued to be hindered by lower U.S. enrollment and unfavorable comparison to last year's digital content and courseware surge due to COVID. The end result was a 4% decline in Ed Publishing revenue. Professional Learning revenue was up 6% for the year, driven by growth in corporate training and Professional Publishing. I'm happy to report that corporate training has now fully recovered to pre-COVID levels and continues to show strong momentum in both virtual and in-person delivery, resulting in double-digit growth for the year and in the quarter. This Q4 growth for corporate training was offset by a professional publishing decline mainly due to an unfavorable comparison to prior year. In summary, APL was up slightly for the year with growth in professional learning, particularly corporate training, offsetting market-related challenges in Education Publishing. In Education Services, we saw revenue growth of 14% for the year, driven by a 72% growth in talent development. This offset a modest decline for university services, mainly due to the cyclical enrollment downswing. As expected, our investments to win new corporate clients and scale operations and talent development resulted in continued strong momentum but also an adjusted EBITDA decline of 26%. For the year, our adjusted EBITDA margin was 12% compared to 18% in the prior period. We have actively managed margins in University Services to be in line with our long-term 15% goal, but continued investment in our fast-growing talent development line has lowered segment profit over the near term. We have a solid plan to materially improve segment margins as we scale beyond fiscal year '23. On the corporate side, the 19 multinational clients we signed this year included top financial technology and consumer companies and I am pleased with the continued strength of our pipeline. We grew tech placements 112% inside a key global client for our tech upskilling program involving hundreds of employees. For the quarter, talent development revenue was up 78%. There is a lot of great momentum here. On the University Services side, online enrollment in our program was up 1% for the year but down 5% in Q4. An early read on our partner summer semester enrollment shows continued softness. While we have confidence in the long-term outlook of our digital higher education, it will take some time for enrollment to return to a more normal growth trajectory. For the quarter, University Services revenue declined 9%. On a brighter note, we are seeing an improved business development pipeline of late with four new full-service partners added in Q4, including Ohio University, Florida A&M, Butler University in Indiana, and Arcadia University in Pennsylvania. In the quarter, we also signed University of Virginia as a fee-for-service partner. We renewed American University and we added 23 online degree programs. In summary, growth continues to accelerate via corporate services as we sign major clients and deliver record placements. In University Services, we have cyclical enrollment challenges to work through but remain confident in the market and in our long-term ability to deliver career-connected education and credential programs that the market is demanding. Steady cash generation remains a foundational strength for Wiley. For the year, free cash flow of $223 million exceeded our guidance, although it was down $34 million from the prior year. This is largely due to one-time items, including a $21 million tax refund and higher annual compensation payments for fiscal year '21 outperformance. Also contributing to the unfavorable variance was unusually low CapEx in fiscal year '21 due to COVID. Cash from operations of $339 million was down $21 million from the prior year. With regard to our balance sheet, our net debt-to-EBITDA ratio was 1.6 at the end of April compared to 1.7 at the same time last year. Liquidity continues to be steady with $100 million of cash on hand and undrawn credit capacity of more than $685 million. With our consistent cash generation, we feel comfortable at these levels. And absent acquisitions, we would expect to apply free cash flow after dividends and share repurchases to debt repayments. Given the rising interest rate environment, maintaining a modest level of leverage continues to be a focus for us. Note that we manage our exposure to fluctuations in interest rates using swaps with $500 million of debt at fixed interest rates as of year-end. The weighted average interest rate on total debt outstanding in fiscal '22 was a little over 2% and we expect the weighted average interest rate on total debt to rise to a little over 3% in fiscal year '23. Turning to capital allocation. We continue to balance reinvestment in profitable growth drivers with targeted acquisitions in key growth areas and return to shareholders. CapEx for the year was $13 million higher than in the prior year which saw lower spend due to COVID. In fiscal '22, we invested in products and platforms in Research, talent development, and digital courseware. M&A total spend was materially lower this year than in fiscal '21. That said, we did add critical capabilities in Research Solutions and University Services. Going forward, you can expect us to remain active but very targeted in our M&A strategy, focusing mainly on expanding our research journal portfolio, Research Solutions offerings, and corporate talent development capabilities. On average, about half of our free cash flow is returned to shareholders in the form of dividends and repurchases. We are immensely proud of our 28-year record of consecutive dividend increases and our current yield is approximately 2.6%. Also, in fiscal '22, we devoted $30 million to share repurchases, up from $16 million in the prior year. We will continue to be opportunistic on this front with nearly $200 million remaining in current repurchase authorizations. On to operational excellence. Brian and I, as well as the rest of the leadership team, are relentlessly focused on streamlining and simplifying our operations to improve efficiency and our cost structure. To that end, we have already kicked off a targeted restructuring in fiscal '23. And that, combined with real estate optimization, will result in a Q1 charge of approximately $19 million to $21 million. Thus far, the program has identified approximately $30 million to $35 million of run rate savings, with $20 million to $25 million of it to be realized in fiscal '23. These statements are reflected in our '23 outlook and we will continue to identify additional opportunities throughout the year. Also, as I mentioned, we continue to rationalize our real estate footprint, closing additional offices this quarter as we move to a more permanent hybrid work model. Since spring of '20, we have reduced our existing office footprint by 18%. Also, let me say that I believe there's further opportunity to improve our effectiveness through active portfolio management, process reengineering, and workflow automation. It's too early to comment on these initiatives but nonetheless, critical to understand that we're firmly focused on: one, prioritizing investment in our most advantageous growth opportunities; two, driving operational excellence to the organization to remain resilient and nimble in an uncertain economy; and three, driving future margin expansion through simplification and cost reduction. Turning now to our fiscal '23 outlook. I want to first comment on foreign exchange given the unusual variance between our average fiscal '22 rates which is our base for constant currency and the current spot rates as of June 10. As you know, about half of Wiley's revenue was generated outside the United States and therefore, our results are adversely impacted by the strengthening U.S. dollar particularly in relation to the euro and the British pound. Given the recent surge in the dollar, the exchange rate for the euro, for example, has gone from €1.15 for fiscal '22 average to a current rate of €1.06. Similarly, the British pound has gone from £1.36 to £1.24. This has resulted in a negative FX impact to our fiscal '22 outlook for revenue, EBITDA, EPS, and free cash flow of $75 million, $25 million, $0.30, and $25 million, respectively. In the table, we highlight this impact and provide both our outlook at constant currency and our outlook at the current spot rates to improve transparency. Here, I'll be speaking more to constant currency. For revenue, Wiley anticipates mid-single-digit growth at constant currency, driven by continued strong performance in Research and corporate talent development as well as $19 million of organic revenue from fiscal '22 acquisitions. Adjusted EBITDA at constant currency is expected to be in the range of $425 million to $450 million compared to $433 million in fiscal '22. Solid organic revenue growth will be partially offset by higher employee costs due to inflation and targeted investments in Research Publishing, Research Solutions, and corporate talent development. Adjusted EPS at constant currency is expected to be in the range of $3.70 to $4.05, down from $4.16 this year. In addition to wage inflation and targeted investments, we are seeing higher interest expense, higher tax expense, and lower pension income. These three items are expected to account for $0.35 of additional adverse impact in fiscal '23. Note that Wiley's adjusted effective tax rate is expected to rise from 20% this year to between 22% and 23% in fiscal '23. This is primarily due to a less favorable mix of earnings by country and an increase in the U.K. statutory rate. Also note that fiscal '22 benefited from certain nonrecurring tax benefits. In terms of the lower pension income, it's important to note that our U.S. and U.K. pensions have been frozen since 2014 and 2015 and we are above 90% funded. Wiley's cash generation remains strong. Free cash flow at constant currency is expected to be in the range of $210 million and $235 million versus $223 million in fiscal '22. Positive cash earnings and lower incentive payouts are expected to be offset by higher cash taxes, interest, and CapEx. CapEx of $115 million to $125 million compares to $116 million this year. Capital investment will be focused on platform and product development in Research and corporate talent development, continued build-out of our digital commerce platforms, and additional back-office modernization. Before I hand it back to Brian, I want to remind everyone that we changed our ticker symbol in April to WLY and WLYB which is more closely aligned with our global Wiley brand. Back to you, Brian.

Brian Napack, President and CEO

Thanks, Christina. Let me briefly summarize where we're headed in FY '23. First, we expect Wiley's solid revenue growth to continue, driven mainly by strong market fundamentals and the tight fit of our business with the core demand trends in Research and Education. We have transformed the Research business over the past few years, achieving growth while driving strong margins and cash generation, we expect this to continue. We also expect rapid growth to continue in corporate talent development, driven by our ability to solve some of the corporate world's biggest skill and talent gaps. In Academic Education, we'll navigate the current cyclical enrollment challenges while watching for any slowdown in consumer spending which could impact some of our publishing lines. We will continue to invest in both organic growth and seek strategic acquisitions but we'll narrowly direct capital allocation toward our proven opportunities in areas such as our Research Publishing, Research Solutions, and corporate talent development lines. As Christina mentioned, we are significantly emphasizing operational excellence throughout Wiley in FY '23. The clear goal is to increase profitability and expand margins while powering our growth strategy. While always a focus, the current economic environment dictates that we elevate our productivity and efficiency. To repeat, our go-forward objective is to invest in our proven strategies while simplifying and streamlining Wiley. By doing so, we expect to continue our growth trajectory while growing profitability beyond fiscal '23. Building on this, let me walk through our most critical priorities for fiscal '23. In Research, we will continue to drive publishing APL growth to meet growing global demand. We will transition more customers to our transformational read and publishing agreements. We will continue to expand Research Solutions, actively signing new society and corporate partnerships and cross-selling our full offerings to the growing Wiley network. And we will further optimize our Research Publishing operations, lowering cost per article while increasing article conversion rates. In Education, we will continue to add to our corporate client base in talent development while expanding into new verticals and regions. We will continue to drive new partnerships and degree program growth. We will continue to scale our differentiated digital courseware offerings such as zyBooks and we will continue to drive efficiency in areas such as student acquisition and content development. Across Wiley, as discussed, we will be working hard to simplify and streamline our operations to continue to enhance both focus and profitability. On the ESG and impact front, we have committed to setting and achieving near and long-term company-wide emissions targets in line with science-based net zero targets. So in sum, the key takeaways for today are that our fourth-quarter results were mixed. Strong performance in Research and corporate education were offset by cyclical challenges in Education. We delivered on our fiscal '22 outlook for revenue and earnings and exceeded it for free cash flow. In fiscal '22, we managed well through challenging geopolitical, economic, and labor market dynamics. We do expect to see pressure in fiscal '23 and this is reflected in our budget. We expect Wiley's solid revenue growth to continue in FY '23, driven by strong market fundamentals and the execution of our market-aligned strategies. We are making moves to simplify Wiley and improve our operational effectiveness which will expand our margins beyond fiscal '23. Our balance sheet and cash generation remain fundamental to Wiley's strength, enabling us to reinvest, strategically acquire, and reward long-term shareholders. I want to let you know that we plan to host an Investor Day later in the fiscal year with the date to be determined. At that meeting, we will be providing long-range targets. As always, I want to thank our wonderful colleagues around the world for their commitment to our mission, their continuous innovation, and their tireless work in these challenging times. Wiley's enduring success is the direct result of the outstanding work of this great team. Before I open it up to questions, I do want to say that our thoughts continue to be with those affected by the terrible situation in Ukraine. Wiley continues to support humanitarian efforts in that region as we hope and pray for a path to peace. I want to thank all of you for joining us. I will now open the floor to any comments and any questions.

Operator, Operator

Your question comes from the line of Daniel Moore with CJS Securities.

Daniel Moore, Analyst

I apologize in advance as I'm going to approach this from a few different angles, but I appreciate your patience and insights. First, on a constant currency basis, what are the implied EBITDA margins for fiscal '23 across segments? If you can’t provide exact figures, at least give me some directional guidance. What are the expectations for Research APL and services before considering currency effects?

Brian Napack, President and CEO

I appreciate the question, Dan and I always appreciate your smart incisive approach. I will say that at this point in time, we are not providing particular segment information. You can see that currency has had a significant impact on our projections due to the large swings. We're feeling that because over 50% of our business is outside the U.S. But for now, we're going to hold tight on the specific margin projections within the individual segments.

Daniel Moore, Analyst

Okay. In terms of spending, you have been investing significantly in growth initiatives for some time. This has particularly benefited research, leading to higher organic growth. Can you share some specific areas of investment that are increasing in relation to research and talent development as we look ahead to fiscal '23?

Brian Napack, President and CEO

Yes. As you know, we've focused on identifying growth and profit opportunities across our business and concentrating our time and investment in those areas. Over the past few years, this strategy has proven effective. We've narrowed our focus to areas that represent both strengths and significant market opportunities, specifically in Research Publishing and partner solutions in research. Additionally, on the Education side, we are concentrating on career-connected education and fast-growing market opportunities, particularly in our expanding talent development initiatives. In Publishing, we are maintaining steady investment in this proven and now growing business following its repositioning. In Research Solutions, we continue investing in areas that our corporate clients, partners, associations, and publishing partners demand, as we are supporting the ecosystem. This is where we're directing our market-facing investments. Internally, we are working to simplify, automate, and streamline our processes and systems to sustain the strong margins we have in publishing and partner solutions as this business becomes an increasing resource for clients. In talent development, we need to focus on expanding our highly successful offerings into more segments and geographies, as well as broadening them to match the corporate world's demand for talent. Even in areas where we are not significantly expanding investment, such as edge services, we are still allocating capital focused on concrete opportunities and proven strengths, like delivering necessary degree programs and certifications for success in this economy. Across the business, we are modernizing and optimizing our systems to become less labor-intensive, more automated, and faster in our cycle times, ultimately delivering better products more efficiently and profitability.

Daniel Moore, Analyst

Very helpful. And recognizing not giving specific segment or subsegment guide but in talent development, just remind me or remind us, as you accelerate, you mentioned multiple new partnerships and client signings. Does that typically come with an upfront spend for a quarter or two or three in addition to the increased just general investment for growth? Just the cadence of as we've kind of run faster, is that a little bit dilutive initially? Just kind of thinking about the cadence over multiple quarters.

Brian Napack, President and CEO

Good question, but actually no, Dan. These businesses and opportunities we are pursuing, including the addition of new clients and expansion into new geographies, may involve some go-to-market efforts as we aggressively seek out clients where they are located. However, unlike some other businesses, there isn't a significant upfront development investment required. We have the product, and we can quickly develop anything we lack. Considering the cash dynamics of the business, including when and how we get paid, the upfront investment needed is minimal. We see these as very cash-generative businesses, close to the point of transaction.

Daniel Moore, Analyst

Got it. This is likely a question for your upcoming Analyst Day, but you clearly mentioned in your prepared remarks that you remain very committed to the old OPM segment or the Education Services segment. Do you still believe mid-teens margins are achievable, and considering the near-term macro challenges, is there a specific time frame in mind?

Brian Napack, President and CEO

The answer is that we are currently at mid-teens margins. Christina mentioned in her remarks that the overall segment revenue EBITDA margin was 12%, while we are actually still operating at 15% or above in the services or OPM part of the business. We have invested in talent development, which has slightly impacted the overall profitability of that group in the short term as we aim to seize that opportunity. When we encounter cyclical enrollment challenges, such as the ones we are facing, it does affect revenue and profit. However, we are committed and have demonstrated that we can operate our Education Services business, particularly our University Services business, at a healthy profit. There is no need to refocus, as we have always maintained that focus, and we believe it is a stable and consistent business from that perspective.

Daniel Moore, Analyst

Great. Last for me is, I think you gave great color around capital allocation, leverage ticking lower down to 1.6x. Is that still a focus continuing to drive that down lower or likely to be more aggressive in terms of returning capital to shareholders, absent larger M&A, especially kind of where the stock being around current levels?

Brian Napack, President and CEO

Thank you, Dan, for your questions. I want to share a few thoughts before handing it over to Christina regarding this important matter. We have consistently approached capital allocation in a way that balances our internal investments with returning capital to our shareholders, and we will keep doing that. We are comfortable with our current debt levels, and we aren’t planning to change them. This is crucial for our investors; we have been on a journey to identify growth opportunities in the Research and Education marketplace, and we’ve identified those areas of potential that we’ve detailed previously. We have transformed from a company uncertain about potential growth to one with clear opportunities. Our investments in these areas are starting to yield results, as you’ve seen our recent growth trends. As Christina noted, we have been increasing both our top line and bottom line. Now, we are at a stage where we need to start returning margins to our investors and convert growth into free cash flow, which will happen in larger volumes and percentages. This discussion is foundational to all our current efforts. Our debt levels are acceptable, and we operate in recession-resistant sectors. Research is an essential product, and the businesses we serve in this area are also part of this resilient ecosystem. While we often see benefits in Education during recessions, albeit delayed, these sectors provide us with valuable growth opportunities that we intend to pursue. Last year, we didn't allocate much capital for acquisitions, focusing strategically on our growth strategies. Should suitable opportunities arise, we have the flexibility to leverage our current position to pursue them, but for now, we feel confident in our standing. In these uncertain times, we have the resources to invest and manage our debt effectively. I'll let Christina provide her insights as it’s important for you to hear from her. Overall, we are committed to our strategies, have identified opportunities to pursue, and are focused on increasing capital returns while enhancing our operating leverage for our investors. We are satisfied with our current position, Dan. I know this is a lengthy response, but I wanted to provide a solid foundation regarding our views on debt.

Christina Van Tassell, Chief Financial Officer

Thanks, Brian. I think that's very well expressed. To reiterate, we are comfortable with our current position at 1.6%, down from 1.7% last year. We have the capacity to increase above 2%, but there are no current plans to do so. Our focus will be on managing interest expenses and considering the macroeconomic landscape, as well as the opportunities ahead of us. Overall, we feel positive. Our buyback program is solid, and we will continue to follow that path, adjusting as needed, but we are in very good shape.

Operator, Operator

There are no further questions at this time. I will turn the call back over to Mr. Napack for closing remarks.

Brian Napack, President and CEO

I'll make a few closing remarks before looking to the future. Although we haven't provided long-term guidance yet, we intend to share our long-term outlook at the upcoming Investor Day, which I hope you all will attend. We are very excited about the future of this company and look forward to discussing our growth trajectory during that event, particularly our confidence in converting growth into increased operating leverage. Across our segments, we have consistent confidence in maintaining our margins, including EBITDA and operating income margins in the Research Publishing business. We have demonstrated our ability to do this through our transformation, achieving growth at consistent margins. We are optimistic about the partner solutions business and its direction. These are software and tech-enabled services where we expect to see strong operating returns, which we will elaborate on during Investor Day. In our APL segment, we have businesses that over time deliver consistent earnings to the company, although they have slightly dipped due to cyclical trends related to enrollment and ongoing transformations. While we are not offering a specific outlook for our Ed Pub business, we believe it plays a valuable role in our portfolio and we are confident in their ability to generate solid earnings from the revenue there. Although it may not be a major growth driver, it is an important part of our actively managed portfolio, as Christina mentioned earlier. We are confident in the future of that business, which is also adapting to new career-connected opportunities; zyBooks is a prime example with its strong margins. We will increasingly engage in businesses that not only produce some growth but also yield good margins. I've already commented on the margins in our Education Services business, so I won't reiterate those points. All of this should inspire confidence as Wiley, with the intense focus on operational excellence that Christina highlighted earlier, can begin to achieve the operating leverage that our investors desire. Thank you for attending, and I look forward to speaking with you at our next conference call. I also hope to see you all at Investor Day as we finalize the details. Thank you very much.

Operator, Operator

This concludes today's conference call. You may now disconnect.