Pearson Plc Q2 FY2025 earnings call

Strategy

• Strategy remains unchanged, focused on demographics and AI, with a vital role in shaping learning in an AI-driven world.

Execution Progress

• Core businesses showing performance improvements, with launches of new products and services across segments. For example, Assessments & Qualifications has customer wins and renewals, Higher Education has expanded international markets with AI study tools, Virtual Learning has positive enrollment trends, Enterprise Learning & Skills has new wins, and English Language Learning has operational strength and new offerings.

Operational Improvements

• Transforming revenue operations, adopting modern marketing approaches, focusing on a performance culture with reduced roles, and progressing AI-driven simplification (e.g., AI-powered service agent, accelerated content development).

Synergy Unlocks

• Progress in product and service bundling, improved product discovery and development with a single product management tool, and strategic partnerships with Microsoft, AWS, Google Cloud, and HCLTech.

Growth Vectors

• Expanding in targeted markets, redirecting investment into innovation, and making progress in Early Careers (with acquisition of eDynamic Learning) and Enterprise Skilling.

Assessments & Qualifications sales grew 2% with strong growth in Clinical Assessments and UK & International Qualifications, partially offset by declines in Pearson VUE and US Student Assessment. Virtual Learning sales declined 1%, but enrollments and retention trends were positive, with margins increasing to 16%. Higher Education sales grew 4% with IA growth of 21% and 3% growth in U.S. digital subscriptions. English Language Learning declined 3%, in line with expectations, with Institutional business impacted by prior year comps. Enterprise Learning & Skills grew 4% with strong performance from Vocational Qualifications and Enterprise Solutions.

Full Year Outlook

• Financial performance in line with February expectations. Assessments & Qualifications to grow low to mid-single digits in 2025, H2 weighted. Virtual Learning to return to growth in H2. Higher Education to grow higher than 2024. English Language Learning margin impacted by sales phasing. Enterprise Learning & Skills to grow high single digits in 2025. ### Acquisition Impact
• Acquisition of eDynamic Learning expected to be supportive of medium-term guidance, with minimal impact to 2025 group guidance due to near-term integration costs.

Risks

• Near-term pressure on PDRI due to hiring freezes.
• Potential disruption from Department of Ed changes (though no meaningful impact yet).
• FX headwinds affecting earnings per share.

Q: On VUE's paused contract, why was it paused and when does it return?

A: Specific individual situation, not expected to repeat, resuming later.

Q: GenAI cost efficiencies?

A: AI used in content generation, translation, customer service to drive cost savings, benefiting both top line and cost base.

Q: On VUE's new contracts and 2026 growth?

A: Contracts like Salesforce launched, others launching later, performing in line with expectations, but no 2026 guidance yet.

Q: English Language Learning PTE decline and institutional growth?

A: PTE expected to decline, but institutional business in Latin America and government deals expected to drive second half growth.

Q: Higher Ed enrollment and adoption share?

A: Enrollments flattish, but growth from Inclusive Access, pricing, and sales team progress, with increased IA mix and study prep tool rollout.