Digital learning ‘is our strongest growth area by a long way’: McGraw Hill CEO

McGraw Hill CEO Simon Allen joins Yahoo Finance Live to discuss the educational publisher's digital learning opportunities presented by the pandemic and its positive expectations on the infrastructure bill expanding broadband access for students.

Video Transcript

JULIE HYMAN: Like so many other industries, education was really radically transformed by the pandemic. A lot of attention-- increased attention was on it. McGraw Hill, one of the big education publishers, is now a private company, but we do get some insight into its numbers. For example, yesterday it reported a 33% increase in billings in its K-through-12 group.

Let's get more insight into what is going on in the education and publishing space with Simon Allen. He is the CEO of McGraw Hill. He joins us now. Simon, thank you so much for being here.

We've seen, as I said, increased attention on education, increased spending on education. For you, what has-- and your company, what's the biggest change been over the past couple of years?

SIMON ALLEN: Yeah, thank you very much. I mean, really the biggest change has been the shift and the transformation of our industry, and particularly for McGraw Hill, of our business to a digital-delivered future where we are now delivering the majority-- the vast majority of our wonderful content through our platforms, McGraw Hill Connect and McGraw Hill ConnectED and ALEKS.

And the shift to digital has really transformed the way we think about our business, the way we invest in our business, and the way that we believe and we can see the growth that we're having.

You're quite right. We just announced yesterday our half-year results, and our fiscal year runs from April to March. So the end of September was our first half end, and we grew our billings 15% over the first half, our EBITDA growth at 26%. We're very pleased about that. And as you mentioned, for our K-12 business, that grew 33%. The majority of that, of course, being through our digital as well as our print product. So we're very, very pleased with our performance and with our outlook.

BRIAN CHEUNG: Hey, Simon, Brian Cheung here. So we just had this statistic on the screen about 60% of your total billings coming from digital materials. It's even higher, 80% in higher education. But at the same time, we're kind of at this juncture-- again, kind of staving off any sort of large rise in the omicron variant-- a shift going back to the physical classroom. So is there any sort of inclination for McGraw Hill to think that maybe some of that is going to reverse, that you might see more traditional physical materials kind of come back into vogue here, especially as we kind of think about what is the proper balance in what might be a hybrid learning environment in the future?

SIMON ALLEN: Yeah, that's a great question, Brian. It's actually we think of our business as a blended business where, whether or not you're teaching remotely or indeed physically in a classroom, you've got to make use of the [INAUDIBLE] digital materials. It's not just that you need to be remote to use our digital products. Teachers in the classroom with whiteboards, higher-education professors, they all use our platform material.

The benefit of using our platforms is that you can obviously operate very flexibly. So if there is a need for campuses to shut, for children to go home again, then clearly by having a flexible approach to delivering all of the courseware so the students can relax-- they know exactly what they need to work with to succeed in their classes to continue their education. All of that is done through a flexible route.

So it's both digital-- that is our strongest growth area by a long way. But we will obviously also supply print where it's required to make sure students and their teachers are very, very happy with the material and the coursework that they get from us.

BRIAN SOZZI: Simon, what policies from the Biden administration will help lift your business next year and by how much?

SIMON ALLEN: Yeah, I mean, we're looking at this all the time, Brian. And the last time I spoke to you guys in August, we were talking about the Rescue Plan and the CARES Act. Now, of course, we're talking about the infrastructure bill, and this is very significant for us as a company but, frankly, for society because what this is now doing is providing-- they ring fenced a substantial amount of money. It's over $60 billion that's going to be focused on making sure that Wi-Fi broadband is applied across the country, particularly into the urban areas.

It isn't-- a lot of people think about the rural students, and I think with rural students, you're looking at around 4 and 1/2 million that are now lacking direct reliable broadband access. But it's over 13 million students in the urban areas that will not still yet have that access until this infrastructure bill is applied, and now it's been approved.

It's very exciting for us to think about providing content for those students that were not able to access it before. And, of course, that's going to help close the equity gap, which, sadly, has been growing through COVID. But now we've got the opportunity to address some of those students in the poorest urban areas across the country with all of our materials because we know and their teachers with great confidence that they have the broadband access that they must have.

JULIE HYMAN: Simon, good to see you. Simon Allen, McGraw Hill CEO, on the state of education and educational publishing right now. Appreciate it.

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