Pearson plc 2026 Q3 Earnings Call

Good morning, everyone, and welcome to Pearson's 2026 nine-month trading update. There will be two ways to submit questions today. If you would like to ask your questions personally, please use the numbers that are displayed on screen. The lines will open following the prepared remarks. Alternatively, please submit your questions using the Questions tab at the top right of the screen, and we will address them in turn at the end. With that, I will hand over to Omar.

Thank you, Alex. Good morning, everybody. It is a pleasure to be with you today, and thank you for joining us. I am here in London with our CFO, Simon Robson. Before we begin, let me briefly touch on the executive change that we announced this morning. I would like to thank Tom ap Simon for his two decades of service to Pearson and his significant contribution to the evolution of Virtual Learning and Higher Education. Both business units are in better shape today because of Tom's leadership. I am pleased to welcome Kate Eberle Walker, who joins us in December to lead our newly formed U.S. Higher Education business unit. Kate brings deep experience across technology and education and will work closely with Tom to ensure a smooth transition. In addition, I want to provide an update on Vishaal Gupta.

Vishaal has been doing a good job driving progress within our Enterprise business, in particular, establishing and operationalizing a new enterprise sales team that can sell the entire range of Pearson's offerings. Vishaal will continue to lead the new Enterprise business unit, and I have asked him to take on an expanded role as chief business development officer, tasked with establishing a wider business development function across Pearson. Turning now to our trading update. You will have seen this morning's announcement already, so let me expand on the key takeaways and then we will open it up for Q&A. Today, I would like to make four points. First, we have delivered another good performance, with group growth accelerating to 6% in Q3. This performance reflects the breadth and diversity of our portfolio, the strength of our brands and offerings, and our role as trusted verification infrastructure for skills globally.

Second, this progress means we remain firmly on track to deliver our full year 2026 guidance, with a narrowed profit range reflecting confidence in our outlook. Third, we are deploying capital in a disciplined manner to drive long-term shareholder value and accelerate our strategic progress. You can see this through the acquisitions of ITS and Workera, which we announced this quarter. Finally, today, we are announcing an important step towards building an even stronger company for the future. Our objective here is simple, to optimize Pearson's structure to orient on growth and unlock our full potential. These changes will be better for our customers, better for our business, and simpler for investors. Let me take each of these in turn, starting with our performance. We have delivered another good performance, with sales growth accelerating to 6% in the third quarter as expected.

Our portfolio strength underpins the group performance, offsetting puts and takes at the business unit level. In Assessment & Qualifications, we are pleased to report good momentum from new contracts. Our agreement with Anthropic to deliver its global certification program reinforces our leadership position in skills verification. Since launch in July, we have moved quickly, delivering more than 230,000 secure tests. Even though it is early days, strong demand signals reinforce our conviction that AI adoption is increasing the need for trusted, validated skills with Pearson uniquely placed to benefit. Virtual Learning delivered another standout back-to-school result. Enrollment performance was driven by continued demand for alternative schooling options and strong execution, underpinning our confidence for the academic year ahead of us. In English Language Learning, we are lapping a difficult comparator in PTE following last summer's test enhancements, alongside navigating an ongoing challenging market.

Our teams are continuing to execute well, positioning us strongly for when the end markets recover. Enterprise Learning & Skills continues to benefit from new vocational qualification contracts coming on stream and the monetization of our strategic partnerships, specifically outcome-based skilling programs for our technology and software partners. Finally, Higher Education performance sits below our expectations. While our core U.S. courseware business delivered a solid back-to-school result, progress was not as strong as we had anticipated, and market conditions in K12 created additional headwinds. In response, we are taking further targeted action to strengthen product innovation, commercial execution, and talent, supported by a new organization structure that sharpens our customer focus. Improving performance and closing the gap to peers over time remains a clear priority, and our go-forward reporting will provide investors with greater visibility in our ongoing progress.

Our third quarter performance, together with the resilience provided by our diversified portfolio, means that we remain firmly on track for the year. We have narrowed the profit range to reflect our confidence in the outlook, while continuing to expect a very strong cash result. More importantly, our performance provides further evidence that Pearson is becoming a more predictable, mid-single-digit growth company, which is exactly what we set out in our medium-term framework in 2024. Visibility into the fourth quarter is good, and it is worth remembering that FY 2025 was heavily weighted towards Q4. Let me turn now to our disciplined deployment of capital through strategic M&A. The framework that guides our decisions is straightforward. We continue to invest in assessment and verification infrastructure, the core of Pearson, and we are building capabilities to scale in our medium-term growth vectors where we see attractive growth opportunities and a clear right to win.

The acquisitions we announced this quarter with ITS and Workera demonstrate that approach. The acquisition of ITS brings a trusted assessment technology partner in-house. They are deeply embedded in the professional association assessment ecosystem and will help broaden the services we can provide to customers. Their capabilities also support growth in adjacent areas, including mid-stakes assessment and international markets. Workera is a pioneer in enterprise assessment and skills verification. Its AI-powered skills intelligence platform complements our existing offerings and will help us build a more comprehensive skills product portfolio for enterprise customers. Workera already serves blue-chip customers including Siemens Energy, ServiceNow, and Booz Allen, which will open further growth opportunities for Pearson. Workera's talented AI native team will play an important role in driving innovation and scale across our enterprise skills offerings. These acquisitions reflect our disciplined approach to capital allocation.

We will continue to invest behind them to drive scale and product innovation, supporting our growth plans. We expect both acquisitions to be accretive to Pearson's medium-term revenue growth. Finally, I want to turn to the changes we announced this morning on how we will report and operate. We are sharing this news now to give you early visibility of how our reporting will change from January 1st next year. Alex and the IR team will support you through the transition ahead of our preliminary results, including providing necessary pro forma restatements. Today, our portfolio is organized through five business units, which internally reflect more than 20 specialized sub-units.

This structure is a function of our history, and it now needs to evolve to give us greater agility and consistency across the business, improve our go-to-market capability, and to unlock greater value from our offerings and expertise across the whole Pearson platform. The new model creates four larger, more predictable customer-led businesses with clear ownership of customers, offerings, and performance. Supported by strengthened core capabilities, this will bring greater commercial focus, closer customer relationships, and more consistent execution. This is fundamentally a growth move. It will help us to identify and pursue opportunities more effectively, bring our distinct offerings together around customer needs, and build the platform for Pearson's next phase of growth. Importantly, this is not a change in strategy or portfolio. We are optimizing our structure to allow more effective execution. Let me take you through the new approach.

We are organizing Pearson around two core customer groups, learning institutions and enterprises. This gives us a clear organizing principle with accountability closer to the markets that we serve. We will operate through four larger business units. U.S. K12 led by Art Valentine, U.S. Higher Education led by Kate Eberle Walker, U.K. and International Education led by Sharon Hague, alongside a dedicated enterprise unit led by Vishaal Gupta. Each will have P&L accountability and stronger ownership of its growth drivers. Together, these larger, more focused customer-led businesses give us a more balanced platform and support our ambition to deliver sustainable, predictable, mid-single-digit growth over time. The offerings within each unit reflect the customers they serve. They bring related capabilities together focused on customer needs, helping us serve customers more effectively and pursue opportunities with greater focus.

Importantly, assessment and verification infrastructure remains at the core of Pearson and runs through the businesses. Alongside the new customer-led structure, we are investing in four core capabilities to unlock growth. We will align product investment more closely with customer needs, strengthen business development across strategic customers and opportunities, bring greater consistency to how we commercialize our offerings, and create a simpler, more joined-up customer experience through driving best practice across the group. We have already made good progress in each of these areas, as outlined at previous results. The new operating model represents the next natural step in Pearson's evolution from a holding company into a modern operating business. So why does this matter? This structure is designed to unlock Pearson's full potential with benefits across the business. First, it supports growth. Sharper customer focus and a better-connected portfolio will help us deepen relationships, identify opportunities, and bring more of Pearson's expertise to bear.

Second, it improves performance. Elevated capabilities and more consistent execution on ways of working will strengthen how we develop products and serve customers. Third, it increases agility. Clearer accountability, standardized core capabilities, and decision-making closer to customers will help us respond faster to their needs and to market opportunities. As a result, it makes Pearson simpler. Four larger, more focused, and more predictable businesses with a clear set of offerings will give investors good visibility of our growth drivers and progress. To close today's call, I would like to repeat our key takeaways. We have delivered another good performance with group growth accelerating to 6% in Q3.

We remain firmly on track to deliver our full-year 2026 guidance with a narrowed profit range reflecting confidence in our outlook, and we are deploying our capital to drive long-term shareholder value and accelerate strategic progress. We are optimizing our structure to orient on growth and unlock Pearson's full potential. These changes will be better for our customers, better for our business, and simpler for investors. With that, Simon and I would love to welcome your questions. Operator, over to you. Thank you.