Pearson plc

Good morning, everyone, and welcome to Pearson's 2026 Q1 Trading Update. We will begin with a brief update on our first quarter performance, followed by an open Q&A session. If you'd like to ask a question, press star 1. To withdraw your question, press star 2. For operator assistance, press star 0. And with that, I'll hand over to Omar.

Thank you, Alex. Good morning, everyone, and thank you for joining us today. I'm here in London with our CFO, Sally Johnson. Many of you will already have seen our Q&A results announced this morning, and so I'll just pick out a few key points, and then we'll open it up for Q&A. First, we're encouraged by the good stuff of 2026, reporting revenue growth of 4%. I'm pleased with the momentum that we're seeing in our business, driven by continued strong execution from all our teams. We remain confident in achieving our guidance for 2026, and we reconfirm our medium-term outlook. Looking at performance by business unit. Assessments and qualifications declined 1% as we had expected, and this is on track to return to growth in Q2 and beyond. Supported by new business such as the Standards and Testing Agency in the UK, and recently extended or awarded contracts including ATCA and Google CLAC. Virtual learning delivered another standout result with 21% revenue growth, driven by another excellent enrollment performance, which accelerated from the fall semester. It was further encouraged by preliminary market share data, which indicates that we're gaining share in the market. Higher education delivered 2% growth, with another solid performance in our core US core courseware business, which continues to deliver sustained growth. We expect higher education revenue growth for the year to be higher than 2025, with improvements in the K-12 channel and international markets. English language learning was up 2%, reflecting growth in the institutional business, driven by China and our enterprise offerings. We continue to expect VTE to return to growth this year, driven by share gains in pricing, although the market remains pressured, including in the Middle East, which I'll touch on in a moment. And lastly, enterprise learning and skills grew 8%, supported by good growth in vocational qualifications and continued momentum in enterprise solutions. The strength of our Q1 results illustrates the message we gave at the prelims. Pearson is successful thanks to our unique characteristics and enduring competitive strengths. you'll remember that about 90% of our profit comes from operation complex, interconnected, hybrid physical and digital services which comprise assessments, virtual schools and print. And these demand uncompromising quality levels and trust. The remaining approximately 10% of profit comes from primary digital courseware, where we're deeply integrated in the critical workflow that decision makers use to perform their roles. We're seeing the benefits of these characteristics and strengths in our Q1 performance, and they underpin our confidence in delivering attractive long-term growth. Second, we've made good strategic progress against the priorities we set out for 2026. Let me share a couple of examples. We continue to expand our AI learning and skilling programs through the launch of our Foundations of AI course for U.S. schoolteachers, and together with Adobe, we launched the first professional certification for Adobe Firefly. These reflect our opportunity in helping learners and workers upskill in the AI era. In enterprise skilling, our teams have been further developing the strategic relationships across our nine partners, including recently with Salesforce, as reflected in our Q1 result. We are just at the beginning of what we can achieve with these partners, and we're working with these companies that are amongst the world's leading technology players to shape the approach, tools, and solutions for reskilling in the AI era. This is why they have committed hundreds of millions of dollars in incremental revenues up to 2030 to Pearson. We're using Pearson's proprietary content, data, and assessment capabilities with their scale to serve their skilling needs, those of their partner ecosystems, and those of their customers. Communication Coach developed alongside Microsoft is just one example in this area. Third, We want to acknowledge the conflict in the Middle East. Our first priority is and always will be the safety of our people, and we're committed to doing everything we can to support them. This region, including near-adjacent countries such as Turkey and Pakistan, represents approximately 2% of our revenues, mainly across ANQ and ELL. We do not expect the conflict to impact full-year group growth in any meaningful way, but our teams are dealing with operational considerations such as the announced changes to school exam delivery this year, where we're leveraging well-established contingency arrangements to support schools and students. And we are seeing early signs of possible disruption to the migration and study abroad market relevant for our PCE business. However, both of these factors are small in the context of Pearson's overall performance, and thanks to our very resilient business model, we remain confident in our 2026 guidance. Lastly, as you know, This is our wonderful and lovely Sally's last set of results. So I wanted to say thank you again. What a fantastic partner she is and a friend she's been to me and the whole Pearson executive team. Sally has been working very closely with Simon, Simon Robson, our new CFO, to ensure a very smooth transition, and we look forward to introducing you to Simon at our interim results this summer. And with that, Sally and I are pleased to answer your questions.

Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. If you'd like to withdraw from the queue, please press star two. Our first question is from Kieran Donnelly with Citi. Please go ahead. Thanks for the presentation or the comments. Just on A&Q, can you just remind us of the dynamics going into Q2 around any impact from the New Jersey contract loss? and just trying to help us understand the return to growth comments in Q2 within ANQ. And then just in virtual learning, those enrollment growth numbers are very strong versus some peers that have reported recently. Can you just help us understand any dynamics around the enrollment growth trends in there?

Thanks. Sure. Thanks, Kieran. ANQ in Q1, you will remember, has the comp for PDRI because the federal impact happened in Q2 last year. Q1 hadn't got that, so that's part of the dynamic in Q1, along with New Jersey. The New Jersey impact is across Q1. and Q2, so it's still relevant in Q2, but the PDRI piece isn't so relevant in Q2. And then we have growth coming from the underlying businesses, but also some new contracts that we've had, so the new contracts like Salesforce and ServiceNow that started in the second half of last year, and also In our qualifications business, we have our MCT contract. So that is the delivery of exams for primary school kids in the UK. And of course, if you've got primary school kids in the UK, you will know that they take those exams in the summertime. So that will also be part of the growth that we see in ANQ for Q2. So very confident in ANQ growth in Q2. And then virtual learning enrolments. I know one of our competitors reported earlier with a lower enrollment number. There are some specific dynamics in their business that I will let you go and look at that are relevant to them. I'm not going to necessarily talk to a competitor's numbers, but really good performance in virtual learning. It's the dynamics there are, you know, a market with a tailwind. the kind of drive for parental choice is meaning that people are turning to the virtual learning environment and then we've been really pleased with what we've been doing in terms of our enrolment processes and improvements there as well as how we have driven marketing. I think one thing that is worth pointing out is that we talked about 13% for fall back to school so the 15% is demonstrating that we've actually added enrolments in year which has been partly a a factor of how we've done our marketing this year in terms of when we put marketing spend into the funnel. So really pleased with virtual learning.

Thanks a million, and best of luck in the new role, Sally.

Thanks, Kieran.

Thank you. Next question is from James Tate with Goldman Sachs. Please go ahead.

Good morning, James.

Morning Omar, Sally, AIS, James from Goldman. Three questions, please. I guess firstly, just on the US student assessment business in ANQ, so you recently won or expanded contracts with Maryland and Wyoming. So do these have a financial benefit in calendar 2026? Or is this delivery in the first half of 27? And then I guess, are there any other upcoming tenders you would flag either to win or retain over the next few quarters? And secondly, on ELS, We're now a third of the way through the year. Do you have any more visibility on growth for the division this year? Do you expect to see an acceleration from the 8% in Q1, given the current product row match from some of the new partnerships? And then lastly, on cash allocation, the accelerated share buyback is due to be completed by the end of May, I think, and leverage remains below the two times maximum you've outlined. How do you think about the scope to increase this through the rest of 26 and the timing for such a decision? Thank you.

Should I take the first one and the third one? Sure. Then you can take the second one. Sure. So US student assessment, yeah, so we've got the New Jersey impact in Q1 and Q2. You're quite right. We renewed many contracts last year. I think Thursday was the number that we talked about at prelim. We'd also talked about the extension of the Maryland and the win in Wyoming. Both of those come through a small amount in the second half of 2026, but then also there'll be the upside in 2027 as well when we have a full year. So I guess the answer to your question there, James, is both. And then in terms of other tenders, it's very, very normal for there to be an RFP cycle in this business. So there are tenders that are coming up. I'll remind you of our track record in terms of our retention rate. So 96% last year, and that included New Jersey. So lots of confidence in our ability to retain those contracts going forward. And then on the share buyback, obviously, We're amidst the chair buyback at the moment, so there's no capital allocation for the board to be making a decision on. At the point that we then get into the next cycle where that decision is made, we will apply our capital allocation policy, which I think is quite clear to people from a go-forward basis.

Perfect. Let me just pick up the ELS comments, James. I mean, obviously, we're not sort of giving segmental guidance by quarter to each of these VUs. But we feel very good about what ELS is. I mean, the performance in Q1 was strong in vocational qualifications, which, as you probably know, always is biased somewhat to H1, and so that one has performed very well. We're very good with how it's tracking for the year. Enterprise Solutions, which is where a lot of our enterprise partnerships are inked, is trending in a very good way. The way those contracts are designed, they're all, let's say, five-year contracts and they ramp over time is essentially how they work. And what our teams are doing is working alongside our partners to, of course, figure out, like, where do we apply, you know, very helpful engineering resources in terms of transforming and improving Pearson's business? How do we bring Pearson's solutions and skilling capabilities into their business to help their people? And importantly, how do we work together on joint go-to-market? The most obvious vector of activity in the short term that we're seeing is the tech companies asking for help in skilling their salespeople on their own AI because the tech is moving so quickly and that's providing an area of growth. Importantly, also for their partner organizations. I mean, to give you a sense, an organization like IBM will have something like 30,000 partner organizations around it that help them implement their tech with their end customers. And so those partners also need help in skilling with the new tech that's coming out of IBM. And then you have the actual end customers who also need help with using that AI in the most effective way. And that, obviously, in order for these companies to derive ROI on their investments in the tech that they're building, they need their customers to be using it effectively. And so that's where our teams are working together on shaping the products and services to meet that need. And that's why we're very confident in the future growth in that business.

Very clear. Thank you. And thanks, Annie. All the best for the future.

Thanks, James.

Thank you. Our next question is from Steve from . Please go ahead. Morning, Steve. Yeah. Morning, morning. Just a couple of phasing questions, actually. First of all, just going back to virtual learning, it looks to me as though the second quarter comp is still relatively easy. when we look back at next year, and then it gets more difficult in the second half. So is it fair to assume that the second quarter growth rate can be at a similar rate to the first quarter, and then it starts slowing down? Is that the kind of way to think about it? So that's the first question. And then I think I heard you refer in vocational. I know it's first half weighted, but there was some fading benefit in the first quarter. Can you just clarify whether I was correct on that? Thanks.

So, on virtual learning, you're quite right. The comp for Q2 is easy in the way the one in Q1 was. you think about this business semester by semester so Q1 and Q2 generally would look very similar and actually H1 would look very similar to H2 of the previous year because the enrollments effectively that you're getting are mostly for that school year. The one thing I would point out is that we've highlighted that we got a small amount of funding upside in Q1 which we would normally get in Q2 so whilst the growth in Q2 will be very good for virtual schools. It won't be quite as high as it was in Q1. The way I would encourage you to think about it is that H1 will look very much like H2 last year. And I think H2 last year, we told you, was 18%. And then on vocational, yes, I mean, it's really small in pound terms. but we have had a very small phasing benefit in vocational in Q1 that normalises in Q2, but it's really small from a pound-million point of view.

Perfect. Thank you so much.

Thanks, Dave.

Thank you. And a final reminder for any last questions, please press star 1 on your telephone keypad or star 2 to remove your question from the queue. Yeah, great.

Looks like the update was comprehensive, so we've covered questions quite quickly. Thank you very much, everybody, for your interest in Pearson, and with that, goodbye.

Thank you, everyone, and thank you, Sally Johnson.

Thank you. This concludes today's conference call, and you may now disconnect your lines.