John Wiley & Sons (A Shares) (JW.A) Q3 2022 Earnings Call Transcript

John Wiley & Sons (A Shares) (JW.A 1.05%)
Q3 2022 Earnings Call
Mar 08, 2022, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wiley's third quarter 2022 earnings conference call. [Operator instructions] Wiley's vice president of investor relations, Brian Campbell.

You may begin your conference.

Brian Campbell -- Vice President, Investor Relations

Hello, everyone. 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 described by U.S. GAAP and therefore, cannot be comparable to similar measures used by other companies, nor should they be viewed as alternatives to measures under GAAP.

Unless otherwise noted, we will refer to non-GAAP metrics on the call, and variances are on a year-over-year basis and will exclude the impact of currency. After the call, a copy of this presentation and a playback of the webcast will be available on our investor relations web page. I'll now turn the call over to Wiley's President and CEO, Brian Napack.

Brian Napack -- President and Chief Executive Officer

Hello, everyone, and thanks for joining our Q3 earnings call. Our exceptional team delivered another quarter of solid revenue growth, and we continue to track to our full year guidance for revenue, earnings, and cash flow. Christina will talk more about the outlook later in our presentation. By the way, this is our first official Wiley earnings call together, and it's great to have Christina as a partner.

She's already having incredible impact on the company. I'll start today's call by saying we have, of course, been closely watching the devastating events in Ukraine. Wiley strongly condemns Russia's invasion of Ukraine, and we call for a ceasefire an immediate return to piece. Further, we call for constructive engagement and dialogue to resolve this conflict and achieve lasting piece that serves all people.

As a global company with significant operations across Europe, we have many colleagues, customers, partners, and loved ones directly or indirectly affected by this conflict. Our hearts are with them and all the people of Ukraine. We pledge to support humanitarian efforts in Ukraine and across Europe. On a happier note, this year marks Wiley's 215th anniversary.

That's 215 years of unlocking human potential by advancing research and education, which we have proudly done through good times and bad, through the industrial revolution, the digital revolution, globalization, and numerous periods of disruption, including recently two global pandemics. We're immensely proud to be an important part of the ongoing American journey, and we'll be celebrating this milestone throughout the year. At Wiley's core, we're in the knowledge business, the creation, the dissemination, and the application of new information and new knowledge. We do our work through scientific research and career-connected education.

And in a world where new information is being created faster than ever, where new discoveries, insights, and innovations are the essential lifeblood of every career and every industry knowledge is a pretty good business to be in. As a leader in the knowledge industry, Wiley does three things: we enabled discovery through scientific research, we power career-connected education for learners and professionals and we shape workforces for employers. Year in and year out, the world spends more on what Wiley does, and with good reason, research, and education power the global knowledge economy. Wiley is tightly focused on two strategies that target the seismic trends driving the knowledge economy.

First, we are leading the industry's transition to open research with our research publishing and research solutions. Our impact goal here is for more cutting-edge research to be available to more people faster so it can drive more innovation and advancement. Wiley's second strategy is to bridge the widening talent gap with career-connected education products and education services. Our impact goal here is to ensure that the massive global investment in education delivers a meaningful ROI for society in the form of career advancement and corporate strategic success.

Simply stated, from our customers' point of view, Wiley helps the world's researchers and learners to succeed in their chosen fields, and we help universities and corporations to achieve their goals through research and education, so that they can win in the increasingly competitive global knowledge economy. Wiley achieved this impact to our portfolio of branded content platforms and services, with 82% of our revenue tech-enabled. We offer everything to the world through our market-responsive business models. We deliver it all through an unmatched network of university and corporate partners, and we succeed as a business through sharp execution.

Wiley's consistent strategies in open research and career-connected education are paying off with solid revenue and EBITDA growth over the three-year period through the COVID lockdowns and year-to-date. Despite the significant transitions in our sector in a very unusual two-year period, we're expecting to generate over $400 million in EBITDA and over $200 million in cash flow this fiscal year while surpassing the $2 billion mark in revenue for the first time ever. All this shows that after 215 years, Wiley is foundationally strong and performing well. And we believe that our hard work and investment in innovation is setting us up for continued profitable success in the long term.

As you know, Wiley drives positive real-world impact in everything we do, whether it's by delivering more research discoveries to the world or by unlocking the career potential of millions of learners and workers worldwide. As I've said before, the more researchers and learners that we help, the greater the societal impact. And as evidenced in our performance, positive impact is good for business. We are committed to continuous progress in ESG.

For the second straight year, Wiley has been officially certified as carbon neutral. More significantly, we are actively working to lock in on our science-based targets which will provide us with a clear route to sustainability by reducing our greenhouse gas emissions. We continue to drive improvement in our ESG ratings, the latest coming from S&P Corporate Sustainability Assessment. We saw our ESG score triple.

It is now well above average for our industry. This comes as Sustainalytics ranked Wiley in the top fourth percentile for low ESG risk among 14,000 companies. In fact, we were named as one of the top-rated ESG companies for 2022 by Sustainalytics with regional distinction. We still have a long way to go, but we're committed to meaningful progress.

OK. So let's talk about third quarter results. As a reminder, all variances exclude currency impact. Our team delivered overall revenue growth of 7% or 4% organic growth.

Adjusted EBITDA and adjusted EPS were down 5% and 9%, mainly due to planned investments and higher technology costs in research and education services. Revenue was up 10% in research and 18% in Ed Services, while down 1% in APL. I'll review the specifics of our Q3 segment performance in the next few slides and then pass it to Christina to review our results through nine months. But let me start by commenting briefly on current geopolitical and economic conditions.

With regard to Ukraine, both Russia and Ukraine are small markets for us. So we do not expect to see any material revenue impact. Wiley does have a technology development center in Russia, one of several around the world, and we have solid contingency plans in place for this location as in all locations to ensure business continuity. We're confident in those plans but continue to monitor this very uncertain situation, and we will adapt as circumstances change.

As you would expect, this terrible situation is weighing on all our colleagues and is getting a lot of management attention right now. From an economic point of view, there's a renewed focus on inflation and the supply chain dynamics that have been prevalent through the pandemic. Christina is following these topics very closely. We do not foresee any material impact from these factors to affect our fiscal '22 results, and we're watching for inflationary pressure on wages, print publishing, and other costs as we look to next year.

While supply chain management has presented some challenges for us, none have been material and our largely digital nature means that any issues are limited. As a reminder, physical products make up only about 18% of our revenue. Further, our operations and production teams have done an outstanding job of minimizing any disruption through the pandemic. As you would expect, another issue we are watching closely right now is The Great Resignation.

Like all companies, Wiley has seen a modest elevation in our turnover recently, but nothing that raises any major issues. At the same time, we're winning great new talent with critical skill sets, and we continue to see very high engagement overall. We remain highly attuned to how our colleagues are doing, both personally and professionally, particularly after a very trying two-year period. Significantly, they consistently report being highly motivated by our purpose and our important work.

As I said at the beginning of the pandemic in the spring of 2020, Wiley has successfully navigated periods of uncertainty for 200 years and will continue to do so. From a segment performance perspective, research continues to deliver consistent revenue and profit growth, with revenue up 10% or 5% on an organic basis, and adjusted EBITDA up 4% for a Q3 EBITDA margin of 33%. Our performance continues to be driven by solid growth in OA, publishing, corporate solutions, and research platforms. To refresh, there are two complementary parts of this business.

Research publishing, which is migrating to OA and research solutions in which we deliver best-in-breed infrastructure and publishing services to help other players in the ecosystem, such as publishers, societies, associations, and corporations to thrive in the increasingly complex knowledge ecosystem. On the publishing side, Wiley has been unlocking the ever-increasing demand for peer-reviewed research by moving our journal portfolio toward open access. In 2019, as you may recall, we saw what the market wanted in OA and we jumped in the driver's seat. Ever since we've delivered above-market growth in the new PxQ economy, where revenue is a direct function of the number of articles published and the price we charge.

The future looks very good for both volume and pricing based upon the long-term underlying market growth and our ability to win based on the enduring value of our journal brands. Our broad collection of high-quality brands provides both the flywheel to drive demand and the moat to defend the Wiley system. During the quarter, momentum continued to accelerate for our transformational read and publish models with major signings in the U.S. These included the California Library Consortium, the Carolina Consortium, the Big Ten Alliance, and the Department of Energy as well as consortia in Denmark, Israel, Japan, the Republic of Korea, and Slovenia.

These multi-year agreements provide access to all of Wiley's journals for an annual fee while granting researchers at these institutions the ability to publish with Wiley. To date, we've signed 25 major transformational agreements worldwide, and we expect this momentum to continue. These agreements will continue to replace our legacy read-only deals. It is important to note from a reporting perspective that the hybrid nature of these agreements is increasingly blurring the line between business models and revenue lines.

And for this reason, we will no longer separate out Open Access revenue growth rates or OA share of revenue. Our research article output is up 9% year to date, including the addition of Hindawi, but down on an organic basis from last year's unprecedented COVID surge which saw a 16% increase in output as millions of researchers focused on documenting their research. The overall trend line, however, continues to be positive with two-year average output growth of 6% per year. OA article output is up 25% year to date on an organic basis.

On the Research Solutions front, Wiley is enabling the complex OA transition for the rest of the research ecosystem. We're helping societies and publishers by delivering critical platforms and services that enable content delivery, production, transaction processing, and audience monetization. The transition to OA is highly complex, it's costly and fraught with risk. Wiley's scale capabilities ensure that our partners survive and thrive.

We recently made three small but strategic acquisitions to round out our end-to-end solutions in this area. They include J&J Editorial, Knowledge Unlatched, and e-journal Press. Together, they will allow us to deliver a full range of capabilities to our partners and clients, including copy editing and payment services as well as journal workflow technologies. Strong momentum continues for our Corporate Solutions lines with revenue up 11% in the quarter, 19% year to date.

Wiley's value proposition here continues to expand. Our platform enables corporations to reach 15 million researchers and leverage 179 million monthly impressions. Our knowledge hubs allow consumer product companies like Procter & Gamble to engage and activate our valuable audiences, and our career centers help pharmaceutical companies like Pfizer to fill their critical skill and talent gaps. In summary, we continue to see strong momentum across research, and this is reflected in our current operating performance and in the success of our strategic initiatives, which are delivering an even greater opportunity for Wiley going forward.

APL revenue declined 1% this quarter, with Education Publishing down 2% and professional learning flat. Adjusted EBITDA rose 4% due to cost savings initiatives for a Q3 EBITDA margin of 30%. This is up from 29% in the prior-year period. Overall, while APL revenue declined modestly this quarter, year-to-date revenue growth of 3% is tracking to our full year outlook.

We continue to drive margin improvement overall, and we feel very good about the consistent demand and long-term prospects for digital career-connected education for both students and for professionals. Within this segment, Education Publishing performance was driven by lower year-on-year enrollment in the U.S. and unfavorable comparisons to last year's unusual COVID bump. For the quarter, we saw continued growth in digital content, in zyBooks, and in Alta courseware offset by declines in printed course material and test prep products.

Let me say a few words about the current unusual phase in the university content market. In 2020, in the first half of 2021, a COVID drove record numbers of students into digital programs and settings where our digital content and courseware were simply essential. More recently, there has been a natural return to earth of digital enrollment numbers, made worse by a very strong economy. Postsecondary education has always been countercyclical, and this year, some students have predictably chosen to defer school to pursue career opportunities.

Consequently, undergraduate numbers are down over 6% since the fall of 2019. That's 1 million less students in the U.S. system. All this naturally affects our Ed Pub revenue, which is down 2% year-to-date, modestly off what we expected.

As you will see in a moment, we are seeing similar enrollment-driven effects in our university services business. That said, we remain quite confident in the long-term global trends in postsecondary education, along with the opportunities for winning content and courseware to return to growth as we emerge from this unusual period. In our professional learning lines of business, revenue was flat year over year due to the easing of the pandemic-related tailwinds that we saw last year for professional books, including our dummies products. On the positive side, the strong recovery incorporates soft skills training programs continued for both virtual and in-person delivery with growth up 18% in the quarter and 28% year to date.

On the education services side, we saw revenue growth of 18% for the quarter, driven by strong growth in corporate services. Here, talent development revenue rose 112% as demand continued to accelerate for our tech talent development programs. This offset a 3% decline for university services, mainly due to this year's unusual cyclical U.S. university enrollment declines.

As expected, growth investments resulted in an adjusted EBITDA decline of 14%. For the quarter, our adjusted EBITDA margin was 13%. On the corporate side, we're rapidly signing new clients, upselling existing clients, and expanding into new verticals. The five multinational clients we signed this quarter include top financial services firms and a leading global technology company.

And the pipeline remains very strong. We also grew tech placements 122% with our existing client base of Fortune 100 customers. We continue to make very good progress in our strategy to upsell additional tech training services to our expanding network of corporate clients. For example, one of our key global clients has recently agreed to an upskill tech program involving hundreds of employees and other clients are exploring the same.

On the university side, online enrollment in our programs has slowed compared to last year's unprecedented COVID surge, up 3% year to date, but down modestly for the quarter. For context, if you look at it over a two-year period, our online enrollment CAGR is around 7%. So what's happening in online degrees? First, as I said above, we're coming down from the unusual COVID bump that drove students to flow into online programs. Second, as things began to return to normal in the second half of 2021, the delta and omicron variant significantly disrupted both student demand and school admission processes.

The third, as I noted, potential students are now faced with a very strong economy that is luring them away from school and into work. Again, though, we remain confident in the underlying trends in online post-secondary education despite the near-term challenges presented by these unique market conditions. Wiley's high-impact services continue to be in demand, and this quarter, we signed a large top 25 institutions, renewed two multi-year partnerships, and added 22 new degree programs, and we're seeing continued interest from potential new partners. We're also seeing very good momentum in Australia, one of our newer markets, where our work with La Trobe University is now delivering over a dozen degree programs, along with innovative certifications and short course programs in areas like cybersecurity and artificial intelligence.

These shorter career-connected programs are great examples of the education that today's career-focused students want right now worldwide. The single biggest challenge facing universities is student acquisition. As they fight for survival in an increasingly competitive market, schools must attract and enroll students, which is increasingly costly and very complex. Wiley's impressive capability in this area is a key source of differentiation and it includes digital marketing and end-to-end student enrollment services.

This past quarter, we augmented Wiley's core value proposition by adding XYZ Media to the Wiley family, which we acquired for $45 million. XYZ is a market leader in student marketing. They generate over 140,000 highly qualified student leads per year for universities. Beyond this, they are quite profitable.

We know the XYZ team very well because we've been a major client of theirs for years. This enhanced capability is already generating new students for our client programs, improving client success, accelerating new program launches, and enhancing new partner acquisition prospects. For its full year December 2021, XYZ generated approximately $15 million in revenue and $3 million of EBITDA. In summary, education service continues to grow, continues to accelerate incorporate services as we signed major new clients and delivered record placements.

In university services, we have new enrollment challenges to work through, but we remain confident in our long-term ability to drive both growth and profit while helping our partners to deliver career-connected online degrees and credentialing programs that the market is demanding. I'll now pass it over to Christina to take you through our year-to-date results, full year outlook and our financial position.

Christina van Tassell -- Chief Financial Officer

Thank you, Brian, and good morning, everyone. Before I begin, I just want to say how proud I am to be part of Wiley. After only a few months on the job, I am struck by the team's incredible strength and talent and the collective passion for our mission and mission that changes lives for the better. As Brian noted, the team continues to deliver on our growth strategies, and we are driving solid year-to-date performance.

On an enterprise level, we are tracking to our overall full year outlook with revenue up 8% to $1.54 billion or 5% organically, including research growth of 10%, APL of 3%, and Ed services of 16%. However, there is some variability to note, namely in Education Services, where rapid growth in corporate talent development is offsetting unforeseen slowdown in university services. Adjusted EBITDA is up 4% to $322 million. It is driven by year-to-date profit contributions from research and APL offset by investments in both growth and business optimization initiatives.

These initiatives, which were highlighted at the start of the year, including -- include Open Access growth to meet global demand and scaling research partner solutions. In career-connected education, we are investing to expand our corporate pipeline and existing relationships as well as scaling our digital courseware offerings. We continue to embed operational excellence across this organization, and this will be a sharp focus of mine going forward. Getting back to our financial results.

Adjusted EPS through nine months is up 4% to $3.09. As a reminder, Wiley's adjusted EPS metric excludes the impact of certain noncash items directly related to acquisitions, particularly the amortization of acquired intangibles. As Brian noted, we don't expect any material impact from inflation this year, and we're currently assessing what potential impact there could be for fiscal '23. Consistent cash generation continues to be a foundational strength for Wiley.

It enables us to execute on our strategic plans, pay for tuck-in acquisitions and return cash to shareholders. Through nine months, cash flow from operations of $158 million is ahead of prior year by 2% or $3 million. Free cash flow of $77 million is down from $80 million, where higher cash earnings offset by higher -- was offset by higher capex and annual compensation payments. With regard to our balance sheet, Net debt-to-EBITDA ratio was 1.9% at the end of January compared to 2.2% at the same time last year.

Liquidity continues to be steady with $109 million of cash on hand and undrawn revolving credit capacity of more than $560 million. Capex for nine months is $6 million higher than prior year, and we allocated $71 million to acquisitions in research and university services, which Brian already highlighted. We will continue to be active in M&A as we seek our targeted acquisitions and capabilities that support our key growth areas. We continue to return capital to our shareholders with $83 million devoted to dividends and share repurchases through nine months.

This is up $65 million from the prior year. Our current dividend yield is around 2.8%, and we repurchased 448,000 shares year to date at an average cost per share of $55.48. There is approximately $200 million remaining in current authorizations. Now let's turn to our outlook.

Given our year-to-date performance and leading indicators, we are reaffirming our fiscal '22 guidance ranges, which are: revenue growth of mid-to-high single digits to a range of $2.07 billion to $2.1 billion; adjusted EBITDA in the range of $415 million to $435 million with profit gains on higher revenue tempered by investments to drive profitable growth in research and education Services. Adjusted EBITDA -- adjusted EPS in a range of $4.00 To $4.25 and free cash flow in the range of $200 million and $220 million. Higher cash earnings are expected to be partially offset by higher capex, higher net cash taxes, higher annual compensation payments for fiscal year '21 performance. Note that revenue and adjusted EPS are trending toward the lower end of guidance due to the aforementioned market conditions in university services and education publishing.

Our year-to-date FX rates are in line with the rates prevailing when we issued our guidance back in June. This outlook assumes current FX rates prevail for the remainder of the year. I look forward to presenting our fiscal '23 guidance coming up in June this year. Finally, we are working to enhance our investment profile.

This is another focus area for me. Part of that is to ensure that we're easily located. Therefore, we will be changing our ticker symbols from JWA and JWB to WLY and WLYB, which more closely aligns to our global Wiley brand. We will be issuing a press release in the coming week and the change is expected to go into effect on April 1st.

And recently, our ongoing efforts to raise the profile of the Wiley brand reached a new milestone with the launch of our external brand campaign. This campaign, a first for Wiley, will allow us to clearly tell the exciting Wiley story while reaching new audiences and broadening our overall exposure. And with that, I'll pass it back to Brian with my sincere thanks for a great first quarter together.

Brian Napack -- President and Chief Executive Officer

Well, thank you very much, Christina. I'll just summarize with the key takeaways for the quarter before opening it up to questions. Wiley's third quarter results are consistent with our expectations and reflect the consistent execution of our well-established strategies. Good momentum in the research publishing and solutions end, notably incorporate products and services across Wiley.

This momentum offset some countercyclical challenges in academic content and university services. To date, we are managing well through some very unusual geopolitical dynamics, economic conditions and post-COVID labor market changes. Our year-to-date performance continues to be solid with revenue, earnings, and cash flow tracking the guidance, which we are reaffirming. The company is on the verge of surpassing $2 billion in revenue for the first time in its long history.

The long-term positive trends that define our markets continue and Wiley's growth strategies are tightly aligned with these trends. Our recent acquisitions will serve to further strengthen our strategies and differentiate Wiley. As always, Wiley continues to drive real-world impact with everything we do while continuing to advance our ESG and sustainability agendas. And finally, Wiley remains a foundationally strong company with consistent cash generation, a very solid balance sheet, and a large recurring revenue base.

Once again, our hearts and support are with those in Ukraine, and we hope for a rapid return to piece. I want to thank our wonderful colleagues around the world for their consistently great work and dedication in these very unusual and trying times. And I want to thank all of you for joining us, and I will now open the floor to any comments and questions.

Questions & Answers:

Operator

[Operator instructions] And we have your first question from the line of Daniel Moore from CJS Securities. Your line is open.

Daniel Moore -- CJS Securities -- Analyst

Thank you. Good morning, Brian. Good morning, Christina. Thanks for taking the questions.

Start with research, if I could. Maybe just talk about what's driving the acceleration and growth in publishing platforms. And do we expect above-trend growth to continue here in the near term?

Brian Napack -- President and Chief Executive Officer

Yes. We're -- as you know, we're very excited about our opportunities on the solutions side of that business. What's driving it today is consistent growth across most of the segments. We're seeing very, very good growth incorporate solutions.

We are seeing good growth in -- across all of our platforms that we're moving. And significantly, as you know, Dan, we have some acquisitions. And one of them, Hindawi, added significantly to our growth on a year-on-year comparison basis. Having said that, in Hindawi, we are seeing exceptional growth.

We're seeing fantastic growth in our submissions and they have recently surpassed their prior record of articles published. So we're feeling really good about that acquisition. So it's pretty -- we feel pretty good. I will also note that we're seeing a really good rebound in the interest that the corporate market has in accessing our huge audience and that has driven our corporate solutions business up significantly.

So we're very pleased about that and all systems seem good.

Daniel Moore -- CJS Securities -- Analyst

Helpful. Maybe switch gears to ed services, M3 clearly accelerating. Talk about how much of that is sort of the market recovering from COVID impacted comp period versus increased penetration in the marketplace as well as within your customer base.

Brian Napack -- President and Chief Executive Officer

Yes. Well, look, it's a great question. We're super excited about the potential for us incorporate talent development and corporate training overall. We have seen -- we have the right product at the right time for the right problem.

The right problem in the world is an enormous gap that corporations see in their employee base with regard to their ability to fill seats with tech skills and digital business skills. And that's what we do. As you know, we not only train the people. We find them.

We make sure they're successful. We nurture them through the first 18 months of their career, right? It's a fantastic product with incredible results. As a result, we're seeing -- yes, we're seeing penetration in -- increased penetration in the marketplace with great customer acquisition and a great pipeline. We're seeing increasing demand from the clients that we have, who see this solution that's working for them and they're looking to apply it in new areas.

We're seeing it applied in new areas. So where we started with a pretty focused set of skill sets that we were training, acquiring talent, and training for, we're now seeing it across multiple job categories in multiple subject areas. We've seen an interest broadening in the economy from the core verticals that we were serving. So it is not post COVID.

We know we had an enormous talent gap going into the COVID period and that talent gap was concentrated in tech and digital business skill areas. But as we know, we today have a record 11 million open jobs, and those jobs need to be filled. So we're in the business of filling. I wouldn't say this is driven by COVID at all.

I would say it's driven by a fundamental underlying gap in the marketplace that will persist for many years to come. And we have the right product at the right time, and we are broadening and expanding that product to be able to gain more share of the available opportunity.

Daniel Moore -- CJS Securities -- Analyst

That's helpful. Very helpful, Brian. Let me -- again, we'll stick with Ed Services but switch to the online program management side. you detailed some of the returned headwinds and greatly appreciate the color.

Some of your competitors are struggling more significantly with -- can you hear me?

Brian Napack -- President and Chief Executive Officer

Yes, I want to interrupt you because you broke up at the very beginning. So I'm going to ask you to rewind to the beginning of the question if you don't mind. Otherwise, I won't get the whole thing.

Daniel Moore -- CJS Securities -- Analyst

Can you hear me now? Is this better?

Brian Napack -- President and Chief Executive Officer

I can. Yes.

Daniel Moore -- CJS Securities -- Analyst

Perfect. Just on online program management, you laid out some of the near-term market headwinds very well. Some of your competitors are clearly struggling more significantly, it would appear. Maybe talk about your offering relative to some others, whether there's some opportunity in terms of market share gains? And how long do you anticipate these headwinds to last? In other words, when do you think we can get back to growth?

Brian Napack -- President and Chief Executive Officer

Yes. It's a terrific question. I'll say in preface, as I said in the script, that we believe strongly in the future of postsecondary education and the need for universities to partner with organizations like us in order achieve their goals. They're having trouble.

They're having trouble on a lot of levels, acquiring students. It's increasingly competitive. They need us more than ever. But in terms of where we stand in the market, everybody knows Wiley got gold standard services in this area.

And we're very comfortable with our position relative to differentiation and so forth. We just recently significantly improved that differentiation with XYZ, because we're bringing -- we're now bringing to the market what we call internally proprietary student supply, meaning we're bringing students through XYZ as opposed to having to go out and compete in the market for it. So that gives us a differential advantage over others in the marketplace. With regard to what we do from a company perspective in the marketplace, we are -- I wouldn't say that you can characterize our performance as demonstrating anything other than the consistency of our relationships, the consistency of delivery but unfortunately affected by some economic factors that simply are out of our control.

And some of these factors are obvious, this idea that students are going back to work. Well, when will the -- when will that boom end? When will the increasing salaries being offered to students or to potential students allow them to go back to school or be less attractive as they go back to school, it's hard to exactly say right now because in some ways, it's a very unusual moment? We saw COVID do remarkably strange things to student behavior. And quite frankly, we're still sorting it out. But we do see -- and that translated in many odd ways.

So for example, last summer, we saw students graduate earlier than we thought they were going to graduate. Why was that? Well, it turns out because, during COVID, they took away more credits than they would have taken if they were out in the world, so they got through their degrees faster. Well, who could have predicted that? So we're seeing a lot of these things sort out. So the answer to your question is really as the economy normalizes, this business will normalize, and we should return to the trajectory that we're on.

And while that is not a full and complete answer, it's because we don't have a crystal ball. And so we can't speak with definitive clarity. But I do believe, over time, we will revert to a very normal situation where universities are competing in the market for students. They're matriculating them through on a normalized basis and they're putting them out into the job market.

I will say we're going to see an increased focus on one of the things we're focused on right now, which is these nontraditional credentials and shorter courses because what we see among our client base and what we see in the marketplace is this is what the market wants. But that's just a shifting of product focus like happens in any market over time. So long term, we feel pretty good. Shorter term, we're sorting our way through it like everybody else.

Daniel Moore -- CJS Securities -- Analyst

Very helpful. As is the detail on XYZ, I appreciate the color there. Talk about do we think about that as being -- there's more investment to be added to it? Or are there maybe any cost synergies? Just wondering if there's a pathway from getting $3 million-ish in EBITDA to say, $5 million to $6 million over a period of time?

Brian Napack -- President and Chief Executive Officer

Yes. Well, that business was growing very nicely when we bought it. We anticipate it will continue to grow. It's going to provide two things for us, Dan.

The first thing it's going to provide is going to provide this idea proprietary student supply to us that we can funnel into our programs where possible. And through that, there will be -- there are natural synergies because we're now instead of having to go to the open market, meaning Google and advertising to find students, we now get them for free. Now having said that, we, of course, are meaning to continue this business as a business, which gets to the second main point, which is we completely intend to be out there in the market and we'll continue to sell these for the rest of the market because we are -- that's -- it's very Wiley, right? We're in it for the ecosystem, and we will continue to provide those leads to the rest of the market. And as we do, as there is continued competition among universities, which is only going to continue in the years to come.

That's what we've seen, the leads generated by a capability like M3 will be increasingly valuable in the marketplace to us but also to universities all around the country. So that's important. In terms of synergies, I would say that we were already in this business. We had a small part of Wiley that was already generating proprietary leads in this way.

And it adds to that arsenal. And to the extent that we are managing the student journey from the minute they think about a degree or a certification, and they go online and they type into the Google search bar, artificial intelligence certifications, from that moment, through to the end of their college career or their master's degree or their certification, the idea that we can vertically integrate that you bet there are opportunities for optimization. There are opportunities for increased conversion. There are opportunities for cost synergies.

We are -- so in terms of the specifics of M3 and its financials, you have to think about that now is two things. One is as a business that serves the marketplace; and two, is as a core capability that allows us to do a better job for universities in their most painful pain point, which is student acquisition and that, that is an integrated part of the rest of what Wiley provides to these universities. So I can't provide a simple answer to the financials of XYZ because of the robustness of its integration with what Wiley is doing. But we anticipate significant benefits well over and above the numbers that are on the page.

Daniel Moore -- CJS Securities -- Analyst

Got it. Maybe last one, and I'll see if there's others. But you mentioned inflation a couple of times. You're relatively well insulated, certainly to the rest of my coverage list, but still not immune.

So are there levers you can or thinking about pulling to offset some of the potential impacts as we think about fiscal '23 and beyond proactively? And second, to that is how are you thinking about fiscal '23 from an investment year versus maybe a bottom-line growth year? I'm sure you'll give more detail in June, but don't blame me for asking.

Brian Napack -- President and Chief Executive Officer

I never blame you for asking, Dan. So there's two questions there. One is about our investment expectations going forward and the second is about our expectations about inflation and the ability to offset. Well, as you know, Wiley is very reasonably insulated from inflationary pressures in the supply chain in a small portion of why we're 85% digital.

Brian, did I nail that one?

Brian Campbell -- Vice President, Investor Relations

83%, yes.

Brian Napack -- President and Chief Executive Officer

83% digital at this point in time. And so from a supply chain perspective, any effect would be relatively modest. And the largest cost for us is, of course, our people. And in the current environment of the war for talent, things like the great resignation, we must focus on ensuring that colleagues are not only happy here, but they feel fairly compensated.

So we have to take a good look at that. That's really our biggest exposure. But the good news is our products are must-have products, and we've seen through good times and bad. We just haven't seen the price pressure, particularly in areas like research that others have seen.

We feel very confident in our ability to price both in the PxQ model. we've spoken about, overall, we feel like the incredible brand portfolio we have will come out on top as we move to this PxQ model, and the evidence supports that in our pricing, by the way, Dan. But even in the more legacy parts of our business, we're not seeing the price pressure that you would have expected during this terrible period over the last couple of years, I want to say there's not any, but the reason being, if you're a research library, you can't be without Wiley's products. You just can't be.

And there's really good value for money because we put in another 250,000 to 300,000 articles into that product that you're buying from us every year. So it's -- so we're insulated there. There are certainly areas where you could see some price pressure. But if you think about it across Wiley, there's just -- we shouldn't see too much price pressure.

So from an inflation perspective, we should be able to manage our internal cost to the extent possible, albeit Christina and I need to be thinking very closely about our people costs. And beyond that, to the extent possible, we won't have what others have in some areas, which is price pressure. We should be pretty well insulated there. So I'm not giving the prognosis here, which is the beginning of an answer to your second question because, honestly, Christina and I are in the middle of the planning process for our next fiscal year.

We're just looking at the roll-ups and we're just sort of getting through that process. So we'll be able to provide a better view on that in June. With regard to our investment, look, the investment that we've made over the last few years for those of you following, and I know, Dan, how closely you follow, the investments we have made have been paying off. We've invested heavily in the modernization of business models and the infrastructure to support those models and customer acquisition, capability development, and these -- and I think it's clear that our investments have paid off.

Unfortunately, our markets continue to evolve, and we must continue to invest in the business in order to make sure that we are achieving the growth that we need to be successful in the long run. I'm not telegraphing anything other than to say that we expect to continue to invest in this business. And as we -- we're not providing any guidance now, as we look at it, we'll see the areas that we want to invest in and we will do so with the long term in mind. Having said that, we are completely committed to protecting our margins and to delivering the return that -- the consistent return that our investors have come to expect from John Wiley.

So I can't really tell you anything on that until June, but we'll get there then.

Daniel Moore -- CJS Securities -- Analyst

A process is helpful. Thanks for the color.

Brian Napack -- President and Chief Executive Officer

All right, Daniel. Thank you very much.

Operator

[Operator instructions] And there are no further questions at this time. Mr. Brian Napack, I turn the call back over to you for some closing remarks.

Brian Napack -- President and Chief Executive Officer

All right. Well, again, thanks, everybody, for joining. And we look forward to sharing the fourth quarter and full year results in June and an outlook on next year.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Brian Campbell -- Vice President, Investor Relations

Brian Napack -- President and Chief Executive Officer

Christina van Tassell -- Chief Financial Officer

Daniel Moore -- CJS Securities -- Analyst

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