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John Wiley & Sons (A Shares) (NYSE:JW.A)
Q1 2021 Earnings Call
Sep 03, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


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 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

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 will 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 resilience of our business and 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 taking 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 was 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 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 '21.

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 healthcare 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, and 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 career center.

I'll provide a bit of forward-looking color for each of our three segments. In research, our strong market position and diversified revenue streams are providing a solid foundation through this time of change. Calendar '20 subscription agreements are locked in through December of this year, and our calendar '21 renewal season just recently started. We do anticipate that COVID-related budget constraints at libraries will result in some price pressure for '21, 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, 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 in 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-19-related declines in our traditional business lines. For the remainder of the year, we expect that 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 upon 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 strategies.

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% for fiscal '20. 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.

Universities are facing significant pressures this year as they 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 good pipeline of potential university partnerships, both in the U.S. and abroad and 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 service 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 '22 goal of the 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 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 reported $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 companywide 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 as the anticipated savings -- 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 functioning 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 this challenging moment -- at this challenging moment because we're seeing compelling evidence in our KPIs that our markets are strong and that 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.

Questions & Answers:


Operator

[Operator instructions] Our first question comes from Daniel Moore with CJS Securities.

Daniel Moore -- CJS Securities -- Analyst

Good morning. Thanks for taking the question. 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 back files, 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

Yeah. I'll start, and John can chip in. So, we're seeing -- definitely seeing good momentum in Research publishing. The COVID crisis has definitely increased the interest in -- or 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 -- it's 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, are leading researchers to choose Wiley and choose our journal.

Daniel Moore -- CJS Securities -- Analyst

Indeed. And on OA specifically, is it more article output from the same customers? More interest from new parties? How would you sort of weigh those two?

Brian Napack -- President and Chief Executive Officer

Well, as you know, in Open Access, the researchers themselves are deciding where to submit their articles. And as they do, they're 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 researcher 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.

So, we believe that we're seeing researchers choose us, quite simply stated. If that answers your question, Dan. If I didn't answer it specifically, please follow up.

Daniel Moore -- CJS Securities -- Analyst

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

Brian Napack -- President and Chief Executive Officer

Yeah. Look, currently, as you look at our -- go ahead, John. Yes.

John Kritzmacher -- Chief Financial Officer

I'll answer this in a way that is also responsive, Dan, to your question about what was 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, 70% of our research publishing business is subscription and about 10% of it is OA. The remaining 20% of our business, Dan, is, frankly, largely products and services that are derivatives of articles that are published under subscription, such as reprints that you mentioned and such as corporate advertising.

So, that's roughly the split of revenue that we have today. And of course, the subscription base is largely contracted, right? So that's well in play, but we're coming up on a renewal season. You asked whether -- you asked about are there significant backhaul 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 -- CJS Securities -- Analyst

That's helpful because that can be really high margin. One more, and I'll jump out. But you alluded, Brian, to obviously 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 -- well, may or may not warranted, we'll see.

But I know you don't want to get into the guidance, but when you think about Research, is there a range -- I guess, one, how are those initial dialogues going for calendar '21? And two, is there a range of revenue growth that you might be able to -- 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.

Brian Napack -- President and Chief Executive Officer

Yeah. Yeah, look, I mean, 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 we're trying to get a sense of it. But it's really early in the renewal season, and so it really is too early to tell.

We do expect some price pressure. But we expect that that price pressure should be offset by this strong growth that you're seeing in OA and in platforms and other areas. So, the simple answer is it's too early to tell but that 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 -- CJS Securities -- Analyst

OK. Helpful. I'll follow up with -- jump back in queue with any follow-up.

Operator

Our next question comes from Drew Crum with Stifel.

Drew Crum -- Stifel Financial Corp. -- Analyst

Hey, guys. Good morning. So, Brian, historically, when GDP has fallen and unemployment has risen, enrollment trends have accelerated. And 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 Ed Services that you reported in the quarter, is that indicative of what we should anticipate for the balance of fiscal '21? And then, I have a follow-up.

Brian Napack -- President and Chief Executive Officer

Got it. So, from the perspective of the demand patterns in higher ed, this -- there's no question that there is a relationship between GDP, unemployment and college enrollment. That -- historically, that relationship has been one with a bit of a lag, a 12 to 18-month lag. And so, we do expect that to play out here, and we believe we're already seeing it in our leads, in our interest and in our enrollment.

But really, traditionally, that's played out over time. What's happening now in enrollment is different than that, though. What's happening now is literally a practical preclusion on universities from running schools as they normally had and a depression or a downward pressure on enrollment that's come from health fears related to being in large groups of people, as everybody knows. So, what we're seeing -- the enrollment pressure we're seeing is not some sort of an inverse relationship to the tradition.

In fact, it's a novel pressure. And 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, and this is really important, from Wiley's perspective, our -- and that has -- that, by the way, will affect our principal sales.

But from Wiley's perspective, 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 supposed to -- if you're usually in a classroom, but now you're going to be studying from home in a virtual environment, you have no choice but to get the digital materials. You can't share. You can't -- a book is not going to help because you need to be in the courseware.

So, that is contributing to an upswell in the parts of that business that we are strategically focused on in the future. So both in the services business, where we're focused on online enrollment, and in the courseware business or the content 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. Then answering second part of your question, we are seeing -- obviously, results are backward-looking. And in the spring, we definitely saw some shock to the system from COVID that affected enrollments.

It just -- this is not surprising. But over this summer, we started to see elevated levels of interest in our -- in lead generation and in conversion, leading to pretty good enrollment trend. So, our enrollment actually was up around 9% recently, and then we should see some of that continue. But again, we're just getting into the semester.

We'll just see exactly how this start goes. And 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 things that I've been talking about, both the short-term shift to online translating into a greater acceptance of online learning and online education where it is really is the norm now in many cases for a large portion of people getting postsecondary educations, and then followed by what we expect to be a significant, economically driven increase in interest in education due to the inverse relationship that you identified before between the economy and enrollment in schools.

Drew Crum -- Stifel Financial Corp. -- Analyst

Got it. OK. 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?

Brian Napack -- President and Chief Executive Officer

OK. I'll pick up the OA question first. We're -- long before COVID, we were seeing significantly greater volumes of submissions and consequent volumes of our output. That has continued and increase through COVID-19.

We see no reason to believe that it's not going to continue. There might be a slight elevation now that's related to researchers being at home and finishing up papers. You think that would've been done already, and yet the elevated levels continue, and in fact, they're increasing. So, we're very bullish on those volumes levels continuing at a high level on a go-forward basis.

John Kritzmacher -- Chief Financial Officer

And then, Drew, on your question with respect to cash flow and, in particular, the impact of working capital that I referenced in my comments, which were the biggest drivers. I mean, by the way, we had very strong performance in the quarter from a real earnings growth perspective, but then working capital played against us. And in particular, I would note that our cash collections associated with journals were pretty strong and in line with our expectations, so we're feeling good about collections there. We do have some customers that have requested extended terms, but it's not a material impact to our results, and we feel like that's flowing well.

The most significant impact on the timing of working capital has to do with payables. In the March -- late March and April time frame, like others, we went into a bit of cash conservation mode given potential risks around liquidity in the market at that point in time. And so, we put some pressure on payables at that time. And then, as things began to ease up in our first quarter, we also 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 sort of the normal flow back to a balance after conserving cash at the end of the fourth quarter.

Drew Crum -- Stifel Financial Corp. -- Analyst

OK. All right guys appreciate it. Thank you.

Operator

Our next question comes from Sami Kassab with Exane.

Sami Kassab -- Exane BNP Paribas -- Analyst

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 kindly 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, 12 months down the road, will lead to a slowdown in open access growth as science did not really happen through 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, [Inaudible] moving away from splicing. Do you think the China policy and regulatory changes may have an impact, or is that too small to matter? Is that not something that is big on your radar screen? Then lastly, can you elaborate a little bit on how you see the regulatory environment in OPM? We've had the likes of Bob Sherman and Senator Warren look at OPM. 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 and you have no major concerns on the regulatory front for OPM?

Brian Napack -- President and Chief Executive Officer

Well, thank you very much for asking three questions, each of which is a dissertation. So, I'll take them one at a time. They're very good questions, excellent questions that I'd be asking if I were you. So the first one, on the risk of the elevated level of OA sort of bringing back to some lower level later, we are now six or more months into this pandemic; seven or eight, depending on where you're looking in the world.

We continue to see elevated levels. We continue to see researchers putting out papers. Researchers are going back into the labs, absolutely. And so, we're -- we expect it to continue at some level.

Could it come back a little bit? Of course, it could. We're at a very high level right now. But I will remind you that trends in research are very, very positive in terms of overall increasing volume of output in the marketplace. So, in other words, we see mid to high-single-digit increases in the volume of papers every year.

And that long preceded the environment. We consider that will continue in the future. The second thing is that the research continues to be something that is funded at a very high level. In countries around the world, we see no we see no signs of that declining.

So, yeah, I mean, there's no question that there could be a little bit of an artificial increase, but those artificial -- those increases have continued for quite some time now. The final thing I'd say on that is we believe that our publishing program and our approach to publishing is extremely researcher and market friendly, and we think we're getting more than our fair share of submissions. I'll also remind you that of all the submissions we get, we publish a very small portion of them, and so there's always increasing potential there. So, no, I don't see a snapback or a rebound that goes the wrong way on us in the future.

Now, the question of China, another really good question. China is a super important market in the future of research. China is a very important producer and consumer of research. China represents around 5% of our research publishing business now.

So, from a business perspective, it's not going to swing us one way or the other in any given quarter, but it is very important in the long run, and we are -- and the increasing discussion in China about their endemic -- or indigenous publishing is certainly an important move and important trend. But we have very, very close relationships in China. We have a very good connection to the government agencies and so forth there, and we continue to stay very close to them. Chinese researchers want their journals to be in the best journals in the world so that they can get the recognition and the -- for their work that they desire, and we believe our publishing portfolio leads us there.

But also, we are increasingly partnering in China to make sure that we are seen as the publisher of choice. So, while there is some -- there's always some concern when there are discussions going on in places like China about changes in policy, we believe that, ultimately, we're very well positioned to capitalize on what is still continuing significant growth in both Chinese publishing and Chinese consumption. On the --

Sami Kassab -- Exane BNP Paribas -- Analyst

Sorry, may I squeeze in a follow-up before we move to OPM? In subscription unbundling and sub has seen some strong takeup, a third of R1 universities on unsub within less than a year. Do you see a trend or risk toward more unbundling of the big deals, especially in the U.S. as universities face budgetary pressure?

Brian Napack -- President and Chief Executive Officer

OK. So, if the question is about unbundling and whether we are seeing more or we'll be seeing more, as universities face pressure, they certainly are looking for ways to save cost. I've said we can't really comment on what we expect that pricing pressure to be. But as we look into the market, we don't see a lot of evidence.

We see some one-off cases, but we don't see a lot of evidence of universities and university librarians saying we don't need that content, our researchers don't need it, we're not using it. So, to the extent that we have a high -- which we do, a very high-quality portfolio of journals that is essential to the success of research, we will continue to be purchased by those universities. I'll remind you that academics make their careers based upon research, and universities climb the rankings or to descend in the rankings based upon their positioning in the research ecosystem and both the volume and the quality of their output. So, research and research content is absolutely central to the success of our important clients.

So, while we may see some edge cases because, to be sure, there's pressure in the marketplace, we don't see any sort of any evidence of a large-scale trend toward unbundling. OK. And let me move toward OPM. So, the conversation about OPM has gone on for a long time, and the conversation about the revenue share model has gone on for a long period of time.

We start from the position that we have excellent relationships, long-term relationships with our universities, and we help those universities fundamentally to succeed. We help them to succeed by providing extremely high-quality programs, by attracting students and by matriculating those students at extremely high completion rates, higher completion rates than typically they see in their on-ground programs. So, insofar as we are doing that, we are helping those universities to succeed. There has long been a conversation about the revenue share model.

Our clients seem to be fine with it. Now, to be sure, there will be some movement in the marketplace there, and therefore, Wiley has adopted again, as we always do, very market friendly practices of working with universities on terms that they believe are fair. And we have our bundled revenue share model businesses, we have our fee-for-service businesses and so forth. So, we believe wherever the market goes, we're going to be fine.

Having said that, we participate very closely in the discussions that go on in Washington and elsewhere on the future of education, generally speaking, and on the future of of higher ed and its relationship with service providers. So, we've responded to the various inquiries. They have been ongoing. We expect them to continue to be ongoing.

But we're very close to it, and we are not -- our confidence in the future is based upon the fact that we're in a consensual relationship, if you call it, with our partners, who are getting a tremendous amount out of it. If we, together, or if they decide they want to go in a different direction, we're very happy to go in a different direction with them, and we always have been. So we don't view it as a major threat. It's something to be talked about, it's something to be studied, it's something to be adapted to.

But we are confident in our position and, more importantly, the position and the quality of the services and the value of the services that we provide to the marketplace.

Sami Kassab -- Exane BNP Paribas -- Analyst

This is fantastic and all very convincing. You said in your opening remarks that you had higher completion rates. Did you mean that your OPM program has higher completion rate than equivalent on-campus programs have?

Brian Napack -- President and Chief Executive Officer

Typically speaking, our programs -- I will say, our programs have very high completion rates for the students that start and those that complete the program. I'll remind you that, historically, when the industry has come under pressure, it has been for universities and education providers that have had extremely low completion rates, such that students started but they never finished and, therefore, never got value for the education that they paid for or that somebody else, such as the government or the taxpayer, paid for. That is absolutely not the case in our programs. The completion rates are extremely high, and our clients are happy with them.

And, clearly, students are happy with them because they're staying through to completion and achieving career outcomes that perpetuate the demand for the product.

Sami Kassab -- Exane BNP Paribas -- Analyst

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

Operator

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

Brett Reiss -- Janney Montgomery Scott LLC -- Analyst

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

Yeah. I mean, just generally, looking back over fiscal year '20, we did see some erosion of our margin. I would say that the most significant drivers behind that erosion of margin were two. One was the rapid -- continued rapid decline of print, which has reasonably good margins.

But print, as we know, is in decline, and that rate of decline got a bit faster in the past fiscal year and had an impact on our bottom line. We're taking actions, as we discussed in today's review, to improve the profitability of that business by focusing and by, in particular, focusing our future on digital courseware and digital content. The second factor that contributed overall to the shift in the blended margin of the business, there's an increased component of our revenue coming from OPM business that we just talked about. And we recognize that in its current state, the market itself in its current state that operating margins are low.

But we've been emphasizing that we are balancing between top line growth, which is very important to us, and improving profitability there. And we said that we would drive that business to 15% EBITDA margin by next year, and we're well on the march to get there. But those are the two factors that have been putting pressure on our margin, and both of them are being addressed.

Brett Reiss -- Janney Montgomery Scott LLC -- Analyst

If going forward, there are continued high levels of unemployment, is that a tailwind in that there's a tendency for enrollments in school to go up in that kind of macroeconomic environment?

Brian Napack -- President and Chief Executive Officer

Yeah. So, I'll pick that back up, John. As I was indicating earlier, there is a long term -- and in fact, I think it was either Dan or Drew that pointed it out, there is a long-term established pattern of when the economy goes down and unemployment goes up, that people go back to school. That relationship is typically a lagged relationship, meaning it happens not instantly, it happens 12 to 18 months later, and we do expect to see that.

But we have other tailwinds that are hitting us right now, which is simply that people can't go to school in person. They're physically precluded from going to school fully in person. And so, therefore, we have elevated levels of interest from potential students in taking education in an online world. It also is providing a tailwind, as I indicated earlier, to our digital courseware businesses, which, as I indicated in my remarks, are seeing record increases in usage and adoption because again, if you're not in a physical setting, you need a learning management system based product, something that -- where your teacher can make assignments, where you can do homework, where you can get the content predictably, the content that the teacher needs, not have to Google for your curriculum.

And physical books just aren't as good in those environments. They don't do all those things. And so, there's a significant tailwind that hits you in that sense. And, again, as I indicated, the -- we believe that these are accelerations of long-term trends so that it won't be a short-term blip.

We believe that we're going to see continued elevation of those levels, which is completely -- all of these trends that I'm talking about are completely in sync and aligned with our strategy that we've been working on for the last few years. And it's gratifying to see it start to come to fruition at a time when the world needs both education and research more than ever.

Brett Reiss -- Janney Montgomery Scott LLC -- Analyst

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

Operator

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

Brian Napack -- President and Chief Executive Officer

Yeah, 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 signoff]

Duration: 0 minutes

Call participants:

Brian Campbell -- Vice President of Investor Relations

Brian Napack -- President and Chief Executive Officer

John Kritzmacher -- Chief Financial Officer

Daniel Moore -- CJS Securities -- Analyst

Drew Crum -- Stifel Financial Corp. -- Analyst

Sami Kassab -- Exane BNP Paribas -- Analyst

Brett Reiss -- Janney Montgomery Scott LLC -- Analyst

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