Pearson plc

Good morning everyone and welcome to Pearson's 2025 nine-month trading update. There will be two ways to submit your questions today. If you'd like to ask your questions personally, please use the numbers that are displayed on screen. These lines will be open following the prepared remarks. Alternatively, please type your questions into the questions tab at the top right of the screen and we will address them in turn at the end. And with that, I'll hand over to Omar.

Good morning, everyone, and thank you for joining us today for our 2025 nine month trading update. I'm here in London with our CFO, Sally Johnson. And as always, I appreciate your time and interest in Pearson's journey as we continue to renew this company by executing against the three key priorities that we set out at the start of the year. You'll have seen this morning's announcement already, so I'll just pick out a few points on our progress and then we'll open it up for Q&A. Firstly, on our financial performance. Sales growth accelerated a 4% in Q3, and I'm pleased with the broad-based execution across our teams that they're showing, and in particular, the way that we're navigating the market headwinds that are outlined at our interim results. When we look at the business units, virtual learning delivered a really standout result in the back-to-school period with 17% sales growth, driven by excellent enrollment performance, reflecting improvements in our digital marketing approach, enrollment process, and career offering. Assessment and qualifications growth accelerated to 4% in Q3, with Pearson VUE returning to growth as expected, driven by new contract launches. These were offset in part by ongoing headwinds in federal hiring and spending that continues to affect PDRI. In enterprise learning and skills, we continue to build our go-to-market for enterprise, with growth accelerating in our enterprise solutions business and high-quality new customers coming on board. This is good progress, and I'll come back to it in just a minute. Higher education delivered 2% growth in the nine-month period with a solid performance in core U.S. higher ed, which continues to deliver sustained growth. Q3 saw a decline due to challenging trading conditions in international higher ed and the transition period in our K12 channel. And lastly, English language learning returned to growth in Q3, driven by the competitiveness and resilience of PTE, despite difficult migration conditions in larger markets this year. Our Q3 performance is in line with our expectations, and we're on track for a stronger Q4, given the known business unit dynamics driving assessments and qualifications, and English language learning in particular, alongside the excellent momentum in virtual learning. Naturally, visibility can vary across business units. First, we have a clear line of sight into virtual learning, where Q4 performance is primarily driven by academic year enrollments at the end of September, which are known to us. Second, within Pearson Vue, the customer landscape is certain and contracted, albeit volumes of forecast based on historical trends, so overall visibility into Q4 is decent. And third, even in the businesses that are more content and software focused, we track detailed sales pipeline data to underpin our forecasts. Taken all together, we therefore have good confidence in a strong end to the year and delivering an annual result in line with market expectations. Our next priority for 2025 is to lead on the application of innovative technologies across our products and services. Since we last spoke, a lot has been written about the potential negative effects of AI on many sectors, including our own. So I wanted to take a moment to address that. We are, of course, alert to the potential for disruptive forces. So I want to share with you how we think about this. We continue to invest to maintain the core strengths that distinguish us, including our brand, our very deep distribution and sales network, our broad and diversified scope, and our leading expertise in assessments and verification. And as you know, we're renewing our products and services at pace with AI at the heart of the significant progress that we're making across the group. On this, I'm excited about the commercial opportunities new innovative technologies like AI bring to Pearson. Let me share four examples with you. Firstly, when AI is used effectively, it can personalize learning and deliver enhanced experiences and learning outcomes, in turn, driving demand for our products. We're seeing ever more tangible evidence of the benefits of using AI in our products, including our recent research that shows our AI study tools are meaningfully improving academic outcomes for our Connections Academy students. Our approach to leveraging innovative technologies is grounded in our data-backed learning science and our proprietary trusted IP, which are then deployed in the flow of study, which we believe is a special competitive advantage. Second, we're using AI to increase our speed to market. I've spoken to you before about the suite of content development tools available for our authoring and editorial teams that are powered by a range of leading LLMs. And these teams are now able to produce high-quality content in a fraction of the time, meaning we're able to shorten the product innovation cycle and expand our market presence faster and at a lower cost than before. A good example of this being in Brazil, where our team was able to localize 7,700 videos in little over a month, facilitating a faster international rollout of our study prep tools. Thirdly, we're working with our hyperscaler partners on a set of products that leverage AI agents in combination with skilling and learning data sets to help employees learn in the flow of work. And you'll hear more about these developments from us in the coming months. Finally, you'll recall that about two-thirds of Pearson's business is pure assessments, where we are literally the world leader. And here we're seeing our customers engage more with our assessment products as they recognize the growing importance of relevant verified skills in a world of increasing AI usage. Therefore, as you can see, we're evolving and renewing our businesses quickly to take advantage of these new technologies, which we believe will support long-term growth and provide increased resilience to the business. Before I pause for your questions, let me provide an update on our third priority for the year, growing our business across enterprise customers. Pearson VUE successfully launched a multi-year program with Salesforce, verifying in-demand skills across a diverse set of 80 exams. We were chosen for our global innovative exam delivery options that meet the needs of test takers around the world. And this deal extends our leadership in the technology vertical space. We've also continued to announce new wins delivered by our new enterprise sales teams, including a strategic partnership with Cognizant and a global strategic alliance with Deloitte to help enterprises implement AI-powered learning and build new AI capabilities. These updates build upon the momentum we've made throughout this year, and I want to take a moment to show examples of the range of services we're providing in this space. Firstly, with HCL Tech, we will deploy curated Pearson learning paths in AI, cybersecurity, cloud, and career success, both for their internal staff and their enterprise customers globally. Secondly, we're embedding our learning and assessment solutions into Cognizant's client programs across key growth markets, leveraging Cognizant's regional sales and delivery network to accelerate adoption across industries. And finally, in Saudi Arabia, Pearson has been chosen as a strategic vocational skilling partner for construction, leveraging our expertise in vocational training and English language to support a PIF, the Sovereign Wealth Fund-led initiative to build a future-ready workforce in the kingdom. I'm pleased with the steady progress our teams are making. It reinforces my confidence in our ability to capitalize on the large opportunity in this highly fragmented market as we support enterprises to address their challenges in talent planning, sourcing, and development. I look forward to updating you on our strategic progress with our full year results next year. And with that, Sally and I are pleased to take your questions.

Thank you. If you would like to ask a question, please press star, followed by one on your telephone keypad. If you would like to remove your question, please press star, followed by two. The first question goes to James Tate of Goldman Sachs. James, please go ahead. Hi, James.