Pearson plc

Good morning everyone and welcome to Pearson's 2025 full year results. Today's session will consist of a presentation followed by a Q&A. There will be three ways to ask questions. For those of you joining us in person, please raise your hand at the end of the presentation. For those joining virtually who wish to ask a question live, please use the numbers displayed on screen. These lines will follow the main presentation. Alternatively, you can submit questions using the questions tab at the top right of the event platform and we'll address them in turn at the end. And with that, I'll hand over to Omar.

Thank you, Alex. I've been looking forward to seeing you all. Welcome and thank you for joining. We appreciate you being with us. Let me begin with the three things I want you to take away from today's presentation. First, we continue to be very excited for the future of Pearson thanks to mega trends driving strong secular demand for exactly what Pearson offers. And because of Pearson's unique characteristics and enduring competitive strengths. Second, 2025 was another good year of financial delivery and significant strategic progress. Third, we will continue to make progress on our strategy in 2026 with a financial profile that improves further on 2025. I will outline our business progress before handing over to Sally to provide an overview of our financial results for 2025 and expectations for 2026. And then we'll move to Q&A with Art, Tom, Sharon, Michelle, and Tony alongside Sally and me. For those of you in person, we have a series of product demos focused on our most recent releases that will be available after the main presentation just out there. Let me now tell you why I'm confident for the future of Pearson and why we are positioned to succeed. Two factors provide the foundation for our confidence. The first is that megatrends will continue to drive strong secular demand for exactly what Pearson offers. We've spoken before about the ongoing demographic shifts and the advance of AI. These megatrends are already driving major demand for skilling and the validation of skills. How do I know this? because we have valuable revenue commitments from nine of the world's leading technology and services companies for exactly these services. And these trends will continue to reconfigure whole industries, occupations, and educational systems. Enterprises will need to upskill workforces at pace to keep up with rapid technology changes, and institutions will need to provide alternative skilling pathways for vocational and career and technical education. Pearson, as the world's lifelong learning company, is perfectly positioned to benefit from this massive wave of human skilling over the next several years. Second, we will succeed due to Pearson's unique characteristics and enduring competitive strengths. I feel the need to elaborate. Over 80% of Pearson's profit comes from assessments and virtual schools. These businesses are driven by human-led services where complex, interconnected, physical and digital workflows enable large-scale delivery in highly regulated markets. Our services must meet a very high bar for accreditation authorities and regulators, meaning that strength in operational delivery matters. And together... Our services act as verification infrastructure for companies, industry associations, states and government agencies. Examples of workflows include physical and biometric security, supply chain with secure custody of assessments materials and incident response, statistical proof of maintaining standards, alongside capacity management to enable millions of tests to be taken through our network of 20,000 secure physical facilities. Even in today's AI world, some countries or customers are not ready for digital at any scale, so there will continue to be need for print-based products for the foreseeable future. That means that about 90% of Pearson's profit stream as coming from operationally complex, interconnected, hybrid physical and digital services alongside print, all demanding uncompromising quality levels and trust. The remaining 10% of our profits come from primarily digital courseware. For example, at Higher Ed, here we deeply integrated in the critical workflows that decision makers use to perform their roles. These customer relationships have been nurtured over many years, built on a foundation of quality, and that comes with high switching costs. We love seeing the progress that AI labs and others are making in the tools that can benefit learners. And as you know, we're embedding much of their progress directly into our offerings. But our products are not just learning content. They're designed to manage a course end-to-end and are tightly integrated with the learning management and student information systems at the university level, as well as the course curricula and assessments at the individual professor level. These characteristics are very unique and are supported by enduring competitive strengths. Specifically, our unique, deeply embedded position in the learning ecosystem gives us petabytes of proprietary data that we use to improve learning experiences and outcomes. We have data from billions of student engagements and submissions and hundreds of thousands of instances of instructive feedback occurring on our platforms every year. And that allows us to build ever more effective products. Pearson holds leading positions across almost all our businesses. This leadership provides scale economics and strong operating leverage at an individual business level and a breadth of offerings that is unmatched globally. The diversity makes the business model robust. And our trust underpins all of these strengths. This has been gained through a long track record of operational excellence in our large-scale services businesses and through our quality IP expertise in how people learn and how to deliver evidence of learning outcomes with formal education institutions. Trust is valuable and plays to our unique strengths because the closer you are to the teacher and the learner, the more trust you need to operate. And trust in verified skills is even more important in an AI era. Taking a step back, what does this all add up to? The megatrends of demographics in AI will continue to be major demand drivers for skilling and the validation of skills. And Pearson, as the world's lifelong learning company, is perfectly positioned to benefit. Our unique characteristics of trust, infrastructure-level quality, operational strength, and breadth of services that are embedded deep in the learning ecosystems, alongside our investments in AI-driven innovation, deliver strong, durable cash flows and profitability. And our deep and enduring competitive advantages provide us a unique platform for future growth. You'll remember that we set out three priorities in 2025 – and I'm pleased to say that we successfully delivered on all of them. Thank you to the focus of our people, on our customers, and on execution. First, we have again delivered a financial performance in line with expectations, with revenue growth increasing 4%, profit up 6%, and strong free cash flow, demonstrating the attractiveness of Pearson's business model. Second, we continue to embed AI-based innovation across our products and services, allowing us to deliver more engaging, personalized learning experiences. Importantly, we're seeing continued tangible improvements in both learner engagement and outcomes. And third, we're making great progress on enterprise. Our new go-to-market strategy is delivering results, and we see clear financial momentum with a growing revenue backlog now totaling hundreds of millions of dollars of incremental sales to 2030. This means the enterprise business is on a journey towards delivering meaningful, shareholder value, underpinning an acceleration in our growth over the medium term. You'll remember our strategy outline, why, what, and how, that we first shared in 2024, and that framework continues to guide us. We're motivated by our purpose to help people realize the life they imagine through learning. We'll show a video at the end of our presentation, which is part of a series highlighting the real-life impact learning has on real people, playing directly into the unique role of Pearson in the world. Next, our what? It remains clear. We're the global leader in assessments and verification. That is our core. And we're implementing our strategy to drive performance in our core businesses, realizing execution synergies while also investing in the faster growing segments of early careers and enterprise skilling. And finally, our how consists of our internal capital allocation process, prioritizing innovation to deliver better learning outcomes and embedding a high performance culture top to bottom. Let me share some details on our progress in 2025, starting with driving performance in our core businesses. Here, our progress and execution focus gives us confidence that each business unit is on a clear path to improved growth, benefiting from strengthening our sales muscles and developing our product roadmaps to be ever more competitive. First, assessment of qualification growth increased in 2025 thanks to our team's clear focus on executing for our customers. Clinical assessment and our qualifications business performed strongly, benefiting from digital growth and international expansion. Pearson Professional Assessments secured scope extensions and new awards with enterprises such as Google, ACCA and others that we have won and will communicate in the year ahead, which will contribute to faster future growth. U.S. student assessment made progress, unlocking adjacent market growth through our partnership with McGraw-Hill. And we expect continued momentum in 2026 with ongoing growth in enterprise, international markets, and new product innovation. Second, English language learning. Sharon and the team continue to execute strongly with customer wins in key institutional markets, for example in Latin America, and market share gain in PTE, where we maintained our revenue level even while global market volumes declined by about 15%. We will build on the momentum in upscaling enterprise talent with English skills and drive further market share gains contributing to higher growth in 2026. Next, in higher education, we delivered faster growth in 2025, despite the K-12 transition and training conditions in international markets. We progressed our early career strategy, operationalizing our direct K-12 sales team to take advantage of the fast-growing career readiness opportunity. Our core U.S. higher education business performed solidly. with continued strength in inclusive access and, at the same time, we see value upside as we know we can do better, especially in channel execution to improve inclusive access growth and accelerating platform convergence and simplification in 2026. Now turning to enterprise learning and skills. Vishal and the team continue to lay the foundations for growth, building our global enterprise sales team securing a series of long-term meaningful strategic relationships with blue chip names, and I'm going to say a bit more about that in a few minutes. And then finally, virtual learning had a standout year. We're now seeing the benefits of the execution improvements that we told you about this time last year, including our new enrollment portal and targeted marketing investments to capture strong demand. We've enhanced our early careers offering with new industry partnerships, which are now embedded across the entire school network. And we're excited about the potential for this business in 2026 and beyond. We are a leader and gaining share in a market that has strong demand, plus opportunities to add capacity to our school network. And we can drive further business unit specific improvements with execution synergies, driving value to Pearson as a whole. We're driving synergies across our business units, supported by AI-enabled cost optimization opportunities and ongoing process improvements, while enabling faster product innovation. These synergies are providing additional capacity to invest in the business, supporting future growth. In 2025, we generated about 200 basis points of margin through cost savings, which, of course, we are reinvesting. Expect us to continue to optimize our business, enabling ongoing investment and margin progression within our P&L envelope. Let me give you a little update on our progress across our key synergy areas. First, we've consolidated our suppliers and deepened our relationships with a smaller number of key partners to create customer impact, drive efficiencies, and grow our businesses. Our latest partnership with Salesforce provides all of these benefits. We've deepened our sales intelligence capabilities at an optimized cost, while supporting Salesforce's own reskilling priorities with our suite of enterprise products. Second, we're improving our operational systems, leveraging new AI technologies to provide better customer service, faster routes to market, and improved data capabilities to support our decision-making. Teams using our AI content development tools saw content editing time reduced by at least 40%, translation costs reduced by nearly a third, and content alignment costs down by a quarter. Our AI customer services agents handled over 130,000 customer interactions, delivering an approximately 40% reduction in volumes where our agents have been deployed. And we'll unlock further value as we move from these pilot stages to wider internal scale and develop new workflows with agentic technologies. Through our newly established revenue operations function, we now have a single standardized sales pipeline across Pearson and a simplified sales incentive framework, improving forecast visibility and sales disciplines. Now, turning to brand, if you went online... to look for all the Pearson properties and assets and products, you would have been met with this kind of brand soup. We are creating a more unified Pearson presence, allowing for a simplified and intuitive product portfolio, enabling easier selling and purchasing, and, in my opinion, an improved signal-to-noise ratio. You will have seen this in the new Pearson branding that we launched last year, as well as through our product portfolio. For instance, Pearson Learn, and Pearson Career Ready. Finally, we're making progress on implementing a modern software development approach. These Pearson-wide set of tools and methods maximize the value of our sector-leading product and technology cash spend, which totaled approximately £1 billion last year, which means we're investing in innovation for the future while building on our core competitive strengths. Through our efforts, we're accelerating the rate of innovation across the company, leveraging shared capabilities to embed best-in-class and AI-enabled tools and functionality across the business units, supporting their market position. As usage of our AI tools scale among end users, we continue to demonstrate clear benefits, including for educators who are freeing up time to spend on teaching and for students who are actually improving their learning outcomes. Let's now show the breadth of our AI offering in higher education and how we're improving student outcomes.

Not all AI is built the same. Pearson's AI is built for learning. When it comes to higher education, learning isn't just about finding the answer. It's about building knowledge, understanding, and loving the journey along the way. That's where Pearson's AI comes in. It's trusted, with reliable Pearson content at its core. It ensures accuracy, protects privacy, and keeps learning on track. It's tailored, purpose-built for education. It adapts to the student's level, aligns to curriculum, and is personalized to every learner. And it's built into the Pearson tools students and educators already trust. The results? Students using Pearson's AI are 24 times more likely to become active readers. One in three interactions showed students applying, analyzing, and evaluating. And one in five went beyond memorization, showing skills essential for deeper learning. Pearson's AI doesn't just support students. It helps educators to do what they do best. Our instructor-led design supports teaching, not replaces it by reducing admin, scaling personalized support, and keeping educators in control. Available now to millions of learners and educators worldwide. This isn't an add-on. It's part of the learning experience. Because not all AI is built the same. Pearson's AI is built for learning.