Pearson plc (PSON) Earnings Call Transcript & Summary

[Audio Gap] trading update. If you have any questions, please put them in the chat function during the presentation. And with that, I will hand over to Andy.

Hi, good morning. Thanks a lot, Jo, and welcome, everyone, to today's Q3 trading update call. Hope you are all keeping safe and well. And as you can see, I'm here in London at long last with our Chief Financial Officer, Sally Johnson. The two of us will briefly run through the presentation before taking any questions that you may have. So turning straight to the presentation. We continue to deliver the new strategy at pace with momentum in the business, helping us to deliver strong operational and financial progress despite the continuing effects of COVID-19 in some markets. With a strong management team in place who are laser-focused on execution, we've successfully launched our learning service in the third quarter, and we're confident that we can deliver long-term sustainable growth underpinned by a strong balance sheet. Moving on to the highlights. Our group financial performance for the 9-month period is encouraging with underlying revenues up 10% and our full-year outlook continuing to be in line with market expectations. Q3 has seen a slightly different shape to that which we originally anticipated, with a stronger performance in Assessment & Qualifications, helping to offset a COVID-led decline in enrollments in U.S. Higher Education Courseware, which I'll come back to in a moment. Our Pearson+ service has got off to a good start. It's only 12 weeks since launch, but importantly, we've seen a strong response from students, faculty and authors. So overall, we're on track to deliver in line with guidance that we set out in March. I'd like to start by focusing on our Assessment & Qualifications division. Revenue grew 24% year-to-date with a strong performance across Pearson VUE, School Assessment and Clinical Assessment. As I've mentioned before, everything that we do across the whole company has the potential to lead to some form of assessment, qualification, or certification. The COVID-19 pandemic has accelerated the trend of more people looking to upskill and reskill. And we've seen this particularly in Pearson VUE, our professional certification business, through its strong growth this year, driven by commuting demand, particularly in the IT sector as more people look to find work in the digital economy. This encouraging performance helped offset declining enrollments in U.S. Higher Education Courseware. As you know, we've anticipated a recovery in enrollments this year, given both the number of deferrals of students going to college in fall 2020 and a successful vaccine rollout in the U.S. in the first half of the year. While no market data for the fall back-to-school period is available as of yet, our own internal analysis and channel checks indicate that weighted enrollments have likely declined close to mid-single digit with particular weakness at community colleges. We believe that this has been driven by a surge in the Delta variant over the summer months as this graphic shows, spiking dramatically in July and continuing through the key back-to-school period in August which, combined with the strengthening of the U.S. labor market, appears to have resulted in fewer enrollments, particularly as I mentioned, in community colleges. In addition, we also saw an impact on our print:digital mix with print and packages continuing to decline in favor of platform and eText, but not as acutely as we've seen in previous years. Now we believe this was due to two short-term issues. Firstly, advertising restrictions were introduced by Google earlier in the year as the industry seeks to address the issue of digital book piracy. Product listing ads, otherwise known as PLAs, an example of which you can see on this slide, were removed for all digital books globally. That meant that when students search for their text, they were only shown print textbook options. No digital books were allowed to be advertised, including our own Pearson+ service. And we believe that this has influenced purchasing towards print textbooks. Secondly, this back-to-school period essentially had two cohorts of students attending on campus for the first time. We had both this year's freshers and last year's freshers. So most students were making their first trip to campus bookstores, which we believe influenced their purchases. As I said, we're encouraged by the uptake of our Pearson+ service so far. In just 12 weeks, we've acquired over 2 million registered users, reflecting a strong uptake from MyLab and Mastering users and more than 100,000 incremental paid subscriptions. I know that many of you have been following the launch intendedly, so I think it's worth explaining why we're reporting both sets of numbers in terms of the overall registered users and a subset of paid subscriptions. We consider total registered users as the key reporting metric. The reason for this is that our aim is to establish Pearson+ with as large number of consumers as possible and to continue to expand this reach as we build out the capabilities of the product going forward, and we look forward to a lifetime of learning. Having a large and growing customer base using Pearson+ gives us a powerful understanding of our users' learning preferences and needs, allowing us to iterate and further enhance the learner experience as well as deliver better outcomes and product effectiveness. As our reach expands, so will our capabilities. Enhancing our ability to serve more consumers and creating a positive flywheel for Pearson+. It's also important to understand how students consume digital content in a learning context. Many students access their eText solely through a browser, usually on a laptop as that provides the largest real estate to work on. So to understand the total reach of the product, we are sharing registered users data. Publicly available app download data only tells part of the story as the app itself is a subset of the overall usage experience. In addition, one of the other ways of accessing the Pearson+ service is, of course, through the App Store. And there, we've seen a rating of 4.7. Alongside this, the service has a conversion rate, which has risen threefold since launch. And we've had a positive response from students as well as from faculty and authors, which shows strong product market fit. As expected, the revenue contribution is still pretty small at this stage as we scale. We expect that to change as we build awareness and add more content to launch new features and products onto the platform. Now I'm sure you'll have some questions on Pearson+. So let me pause there and hand over to Sally, who will run you through the financials before I come back to give an update on our progress in more detail. Sally?

Thanks, Andy, and good morning, everybody. So as Andy has said, overall, we've seen good financial progress through the first 9 months. Revenue has grown 10% with strong Virtual Learning growth and post COVID recovery in Assessment & Qualifications and English, more than offsetting an expected decline in Higher Ed. Running through each of the elements by division. In Virtual Learning, revenue grew 14% with strong growth in virtual schools due to enrollment growth in the 2021 academic year and school district partnerships. In Online Program Management, underlying growth was offset by the impact of discontinued programs in the U.S. and Australia, the impact of which we expect to end this year. Course enrollments grew 8% on an underlying basis. In virtual schools, we've seen slight enrollment growth for the '21/'22 academic year due to the continuing uncertainty around COVID-19 in the U.S. Revenues will be broadly flat in H2 as enrollment growth has been offset by pricing mix with the uneven enrollment distribution across U.S. states. In Higher Education, revenue was down 7% as growth in international courseware, including Canada and the U.K., was offset by a 9% decline in the U.S. We expected US HE Courseware to be down by less than last year, which it was, but the decline would have been lower had it not been for the weaker enrollments than anticipated. As we look to the longer term and the resolution of the PLA challenge Andy outlined, we remain confident in the opportunity to recapture the secondary market. We're also encouraged by President Biden's Build Back Better Proposal, which includes access to tuition-free community colleges. If passed, this will support enrollments, which should benefit the industry over the longer term. In English Language Learning, revenue grew 15% due mainly to a COVID-19 recovery from 2020. PTE revenue grew strongly as test centers largely reopened, albeit pressure remains due to reduced global mobility and border closures in our key Australian market. We see strong future growth opportunities as borders reopen and in the U.K. bound market with the winning of the U.K. Home Office SELT contract in 2019. English Courseware rebounded strongly driven by international growth across most of our markets, although growth in China was impacted in the third quarter by the recent government reforms. In our Workforce Skills business, revenue grew 5%, mainly due to the growth in GED and Talent Lens, which have been impacted by COVID-19 in 2020. BTEC and apprenticeship revenue was flat. Last, but certainly not least, our Assessment & Qualifications business had a strong performance with revenue up 24%. Q3 saw growth in each element of the division, despite a challenging comparison, the VUE in particular. And in Pearson VUE, sales grew strongly due to recovery post COVID-19 as well as ongoing high-growth online proctoring service on VUE where text volumes rose to 2.3 million compared to 1.3 million in the same period in 2020. U.S. Student Assessment revenue grew strongly following exam cancellations in 2020 with a phasing benefit in the third quarter, given a shift in some state testing to the fall. In U.S. Clinical Assessment, revenue rebounded strongly with the reopening of schools and the delivery of a backlog of education assessments. And in U.K. School Assessment, revenue was slightly down due to a higher rebate of exam fees to school versus 2020, partly offset by growth in courseware. As a reminder, the rebate impacts revenue but not profit as it's a return of save cost to customers. Revenue in those businesses under strategic review grew 7%, driven by COVID-19 recovery in courseware and a phasing benefit in school purchases in South Africa in Q3 in 2021. The strategic review of international courseware local publishing is moving into the next phase, and we've begun marketing a substantial part of the business as well as having completed our sale of Brazilian Sistemas, which we announced in March. We are in a strong financial position with low net debt and strong liquidity. At the end of 9 months, net debt stood at around GBP 700 million compared to GBP 900 million in 2020 with strong operating cash flow offset by dividends. And with that, I hand back to Andy.

Thanks, Sally. Before we get to Q&A, I want to mention a couple of small but exciting investments that we made during the last quarter. In September, we announced the strategically significant acquisition of Faethm, a workforce AI and predictive analytics company. We'll use Faethm's sophisticated AI to model how technological change will disrupt jobs and accurately map the skills need to future-proof workforces at scale. We'll then add Pearson's deep understanding of learning at different life stages to build insights at an individual level, creating content that gives employers and individuals access to the learning they need to unlock their full potential. This acquisition is an important early step for building out our Workforce Skills division. Along with the English Language Learning, we have big and bold strategies, which we will further outline during a deeper dive at our full year results. I'm also thrilled today to announce our partnership with Simon Fuller and XIX Entertainment to create The Academy of Popular Performing Arts, or The Academy of Pop. A new entertainment-driven performing arts digital learning platform. The Academy of Pop will offer innovative coaching and world-renowned instructors and provide performers of all levels with the opportunity to watch, participate and progress within a passionately engaged global community. You can find out more information in today's dedicated press release, and Simon and his team will be providing more details as we get closer to the launch in early '22. I think this is an exciting new venture for Pearson, and I can't wait to share more with you. So to conclude, we have a clear strategy, a strong team, consumer-grade products that are increasingly well positioned for sustainable, long-term growth, all underpinned by a strong balance sheet. I'm really pleased with the strategic strides that we're making, and I'm excited by the encouraging momentum right across the business as we move full steam ahead to execute on our plans. And with that, Sally and I will be happy to take your questions. So over to you, Jo.

Thanks, Andy. Thanks, Sally. [Operator Instructions] So starting off with -- let's kick off with Tom Singlehurst from Citigroup. Andy, one for you, and then Sally, second one for you. Can you talk about what you want to achieve with the legal case against Chegg? And is the end game, the removal of simple answer based study help offerings? And Sally, can you talk about mechanical impact ofQ3 run rate on Q4 growth. Should we expect the overall rate of decline in the fourth quarter to be moderate as a consequence? Andy, do you want to take the Chegg one?

Sure. I'm not going to comment any further to the suit that was filed. I think you'll find all the relevant information within the suit that was filed. We filed the suit because we believe in the protection of intellectual property, and there's nothing more to say. We'll let the legal duty to sort of take its course.

Tom, you talked about a decline. So I'm going to assume that your question was particularly focused at Higher Ed courseware, but just to emphasize that we are happy with market expectations from a profit point of view and as we look to revenues as well. So U.S. Higher Ed, we saw a 9% decline for September year-to-date. I'd expect that to be broadly the same as we look out to the full year. In Q4, we've got a couple of things going on. As you know, it's a big print quarter. So there'll be a drag from that. But also, as digital becomes a more important part of our business, obviously, digital revenues have an element of deferred revenue. And so that's a positive in Q4 as well.

The next question comes from Adam Berlin from UBS. Sally, can you be sure that the enrollment declines you're seeing in U.S. Higher Education Courseware are driven by the market rather than market share?

So thanks for your question, Adam. At the moment, we don't have the external enrollment data. We're expecting that to come through in this month and then to be trued up in December. So we've done an intense piece of work, looking at various internal factors. So sales teams talking to university, sales teams talking to our channel. And then we have data within our systems, things like number of people being registered on a course-by-course basis. So you can see enrollments there. From an adoption share point of view, we also really closely track that throughout the year, and we're really confident that we've not lost any adoption share.

Next question comes from Peter Testa of One Invest. Andy, one for you. Could you please help us understand how Pearson has placed the potential boost to U.S. community college enrollment from pending legislation in Congress?

Yes. Peter, so as a company, we over-index in two areas within Higher Ed. The first is within the first 2 years of full year, the college system. And the reason we do that is that's where there's more market available, more market share for us and more volume. And likewise, we over-index within community colleges as well. So as a company, we favor more the community college in the first 2 years of 4-year college. And as a result of that, as -- if President Biden's proposals go through then -- and we see the resulting impact on attendance and enrollments into community college, we believe that, that will be received well and will be good for Pearson.

And for people who don't know so much about Biden's bill, it's basically looking at 2 -- lots of 2 extra years funding effectively for education in preschool, which I guess from a support of parents, you might be thinking about Higher Education might flow through, but the key part for us is those 2 extra years in Higher Education and particularly community college, probably comes through from a practical point to be more in '23 than '22, but it should be positive for the whole industry in the long term.

Yes. And it's also -- community college is sort of a bit like further education establishments. You go and you take your 2-year -- in many parts of the country, you take your 2-year community college and then you transfer into a 4-year college. So there's a benefit there as well.

Next question comes from Sami from Exane. Sally, a couple for you. Firstly, can you please comment on how you see top line growth trends in Q4 by division? And secondly, given the print versus digital mix, do you expect U.S. Higher Ed courseware to revert to growth in full year '22?

Those are probably both for me. When you said Sami, I thought you said Sally there for a minute. So as we look to Q4 by division, we had pent-up demand in the assessments division across Q3 and Q4 last year. In Q3, that's somewhat offset by that school assessment piece, where spring testing moved into quarter 4. So there's a tougher comparison in Q4. I've talked about U.S. Higher Ed courseware. And then in Virtual Learning, virtual schools, I expect to be flat, where the enrollment pace offset by the pricing mix that I talked about. And then the same for OPM given that discontinued pace. But just to emphasize that then we then through the discontinued pace looking out into the future. Full year '22, I think, we'll talk about full year '22 when we get there. But I think as we look at the things that have happened across this summer, enrollments driven by COVID and by the labor market and then the PLA point that we also made, COVID, hopefully, drops away as being an issue across the piece. We know that enrollments have tended to go in line with the labor market. And the PLA actually, we're really confident is one that can be resolved. So there are a range of possibilities, for enrollment. Of course, we've got the Biden bill as we look out to '23, maybe a small impact in '22 as well.

So the next question comes from Matt Walker at Credit Suisse. One probably for both of you actually. First on, Sally, do you expect full year decline in Higher Ed to be better or worse than minus 7%? And then the second one, Andy and Sally, both -- probably -- split here. Can you please explain where there are 100,000 paid users on Pearson+ and why the 2 million are not paying?

I'll take the first one, and I can start at the second one, and I'm sure you'll want to complement the second one -- you heard about it. So in Higher Ed, I expect that 7% that you see, Q3, year-to-date, to be about 14% at the end of the year with the 9% within U.S. Higher Ed, which is a subset of that to be broadly the same at the end of the year as well. The 100,000 Pearson+ subscribers are those incremental customers that are coming with the $9.99 or $14.99 price point. The people that are coming to us by MyLab and Mastering, of course, are paying as well. They're just part paying as part of their MLM package.

Yes. That's an important consideration to think of this, Matt, that everyone who is a registered user in Pearson+ is paying Pearson in one form or another. As Sally said, we have about 6 million total users of Mastering and MyLab that phased to the two semesters. So we don't get 100% of usage in just this first semester. So you'll see more users come on to the MLM platform for the second semester. And so we're seeing a lot of those users choosing to take Pearson+ as their eText, accompanying the MLM bundle, which is very, very encouraging. And we're seeing some great usage data that's coming out of that initial cohort. The way to look at the other 100,000 is those students who are not part of the MLM platform necessarily. And I've just gone on to search for an individual product title and have then, once selected the title, despite the issues of the PLA as we discussed earlier, have selected to choose to subscribe to Pearson+ to access that title. So that's why I was saying earlier, it's very important to think of the overall universe as that 2 million registered users. That's the cohort we're that we're creating a relationship with, that we're starting to gain consumer insights and can help to continue that relationship over time. And within that then, there is this subset of individuals that we also believe will grow quite significantly who are coming to Pearson+ just solely to select their textbooks.

Next question comes from Nick Dempsey from Barclays. Sally, a couple -- actually, there's 3. So let's take the first 2 and then we'll come back to the third one. Regarding the digital performance in the third quarter in U.S. Higher Education, I understand your point in PLA. But one, do you think you have lost share back to the secondary market during the quarter? And secondly, do you think you've lost share to Cengage and McGraw Hill?

So thanks for the question, Nick. In terms of losing share to Cengage and McGraw Hill, that's why I've been quite specific about adoption share. We are absolutely confident that we have not lost adoption share. From a secondary market point of view, I think the way I put it is that we haven't made the strides into secondary market given PLA that we might have hoped to otherwise. The PLA issue is absolutely resolvable. And then the third one, you know I can't remember 3. So thank you for that.

Actually as I thought I'll come back. I think there's another one coming, too. Next one from Nick. The drop-through of revenues lost in U.S. Higher Education has been high in the past. If that line is a bit worse than you thought, how are you offsetting that at the operating profit level? Will you be working to achieve extra savings in the fourth quarter?

Nick, you're quite right. The operating leverage on U.S. Higher Ed is very high. But as we look across our performance, our performance in assessment has been very good, as we've said. We're always cost conscious, but we have not scaled back on investment. And our bonus accrual remains intact.

It also -- plays to the strength, Nick, the different 5 divisions. It's really important, and I know historically, there's been a -- for good reason, to focus on just U.S. Higher Ed. But as we've seen in the last quarter, the strength of our Assessment & Qualifications business, and you're going to see this, we're trying to create a portfolio of businesses that are complementary to each other that actually kind of create the flywheel effect. A lot of the upside in Assessment and Qual, as I mentioned in my remarks, was actually individuals upskilling and reskilling within the workforce environment with their digital and data skills. So I'm very pleased and encouraged by the strength of the company as a whole.

And actually just staying with Nick. We've got a couple more. So Nick's next one is, it looks as though Virtual Learning has declined somewhat in Q3, but you're expecting stability for H2. The comps are pretty much the same for that division in Q3 and Q4. So what's going to drive better growth in Q4? And the next one is, if online proctoring is here to stay as an important factor at Pearson VUE, is that a medium-term risk because it might lower the barriers to entry in this sector? Sally, do you want to...

Yes. Absolutely. So Virtual Learning was actually slightly up in Q3. Yes, as I said, I'm expecting it to be flat in Q4 for the reasons we've given. Obviously, it was really strong in the first part of the year, given that 40% enrollment increase that we had. And I think we need to kind of step back and reflect on that, a 40% increase last year, and we've held enrollments that I think we shouldn't lose sight of that. So we'll see strong growth for the full year. You want to take it?

Yes. The online proctoring -- well, the proctoring pottery business, we are delivering very high state certificates here from Pearson Test of English through to those in data and cloud management and Clinical Assessments. These are very high states that need a high degree of security. So whether it's in a physical environment, and particularly in the virtual environment, the work the team did last year to invest in a really rigorous and secure online proctoring environment, it's not easy trying to maintain that security and deliver the quality of service to our clients demand. So there's -- it's quite a high threshold. And the team is, as I think we mentioned last year, we really invested a lot of time, money and effort, and resources around that technology to make sure that it works. And I think it is going to stay as hard to replicate its scale. And not all certificates are suitable -- or all exams, rather, are suitable for the online proctoring environment. So I think going forward, you're going to see this continued hybrid rather. And between examinations that are taken in a physical location and those that are taken remotely. Anything to add?

Yes. I think it will be a continuation over time. I think one of the positives within the assessment world of COVID has been something that was really nascent and therefore, we probably haven't put very much investment behind because our customers weren't particularly interested in it, or was only a small subset of customers that are interested in that, it has meant that we've invested and now are probably market leader in terms of the customer experience in the space. So I think we'll probably see both for some time to come, both will be important, but we've got capabilities in both spaces now.

Exactly.

Next question, a bit of comment -- next question. I think it comes from [ Nate Schmidt ] from [ Premier Miton ]. How do you intend to grow your OPM business, given how competitive the market is with [ Cosern ] to you having such a strong presence? And do you intend to launch a comprehensive direct-to-consumer online course platform marketplace akin to your peers?

Listen, I'll kick off. It is a competitive space, and we've chosen to focus on quality of our partners and partnerships over -- necessarily, over quantity. And I think that strategy is paying off for us and very much enjoy the relationship that we have with all of our partners in the OPM space. And in fact, as our partners will attest to, we see those relationships extending beyond -- very much beyond the pure OPM play. And as our college partners look to think about how they want to expand their reach and their opportunities, we're having some interesting discussions with them in terms of how we can move beyond just the pure OPM play, particularly Marigold Arizona State University, Northeastern just to name three. So I think that we're thinking in the -- more broadly than the pure OPM play as regards to that. As regards to marketplace, similarly, we're not necessarily looking to get into a direct-to-consumer relationship in that specific space. Although, as you see Pearson+ as that develops, the opportunity for us to learn more about learners' needs, and requirements and potential careers and to be able to support them as they move from education into employment, I think is a very interesting opportunity. The amount of data at scale and insight that we will get for a learner's journey will be very informative. And in many ways, we kind of get a first look. And it's also true, by the way, with the Pearson VUE business, in a way. We get to know about candidates who are taking a nursing exam, for example, before pretty much everyone else, apart from the candidates themselves. And I think that's very interesting. So as we start to create these relationships, and as we get more data, and particularly through the Pearson+ platform, it does allow us to -- I've said this in the past, we may be starting in the U.S. Higher Ed and with textbooks, but that is by no means the limit of our ambition for Pearson+.

Next question comes from [ Omar ] from Morgan Stanley. Andy, do you want to take the first one and maybe Sally, second. On Pearson+, do you expect the number of registered users to build during the current semester? Or is 2 million at the peak for now? And on the PLA issue, how long do you think it will take to be resolved?

Yes, so on the number of registered users, and I think it's safe to say that you will see that steadily increase over time. I mentioned that the proportion of Mastering and MyLab users in semester 1. And then as we go over into semester 2, you'll see a natural increase in registered users. There's also an awareness factor. Let's not forget that 12 weeks ago, Pearson+ didn't exist. So to create that amount of awareness in the -- amongst consumers, amongst the student population, I think, is a phenomenal job that's been done by the team. And the other thing that we haven't done is change any of the other alternative distribution access points to students to get the material. So I think it's just generally -- there was an interesting stack that the team would take me through last week in terms of the dramatic increase in the dedicated search terms on Google for Pearson+, where now students are typing in Pearson+ specifically into the search bar to find us. And that's a real testament to how much traction, the right product market fit, as I've said, the brilliant reviews that we're getting, a 4.7 App Store review. And the way that we're seeing the functionality and use, all bode well, or albeit, it's early days, as I said, they're encouraging signs. And to your question on the PLA, I mean, we've been -- this is something that is industry-wide. As we said, we've been in very, very positive discussions with Google. I participated myself in a couple of those. And we believe, and fairly confident, that there is a solution that delivers what we were trying to achieve in the first place in terms of eliminating digital piracy and also will then allow us to properly advertise the availability of Pearson+ and its pricing and fairly confident that, that will be in place in time for return to -- or back-to-school '22.

Next question. We've got a few actually from Sarah from Berenberg. Sally, first one for you. Please, can you remind us how much COVID-related savings were in 2020? And how much of that you expect to unwind in 2021?

So COVID-related savings were at about GBP 10 million a month when we were going through the sort of acute lockdown period, so over a sort of 4-ish-month period. Some of those will have unwound this year as people have started to get back on the road. Andy's here for a start. And some of that will unwind to an extent next year. But we're cost-conscious. We're focused on it. I don't think travel is probably necessarily going to return to the -- what we have seen before. I don't think the world of work is going to return to what we've seen before. Offices, we're expecting to people to work from a hybrid perspective. So I don't -- it's not a particular concern to me. We're looking at how we're managing the business from a profitability point of view going forward. I see an increase in profitability over time.

One of the things we've done, Sarah, is really trying to keep a close connection with all of our employees, really, really lending to understanding their needs and concerns from their mental wellbeing at this time to the changing preferences and work ethics. We have a number of pulse surveys. One is actually ongoing at the moment where we reach out and engage with our employees to find out how their sentiments are shifting as it relates to travel in the office. We're in fact, just finished refurbishing [ 80 Stand ]. And for me, we're going to maintain flexible working habits. And for me, offices also change in nature. They're about collaboration, creativity and connection, sort of 3 Cs. So we're designing our office environment to be very flexible and to deliver on those particular needs.

And just carrying on to Sarah's questions. Andy, for you, but also, Sally, you might want to comment on some of the figures. Can you provide some more color on the Chinese reforms and how this impacts your ELL business? And with the issue of PLA in U.S. Higher Education, just to clarify, are you saying this benefited print sales at the expense of digital?

Can you just repeat? I think I have 2 separate questions there. Can you just repeat the last one because it sounds like ELL twice.

With issue of PLA in U.S. Higher Education, are you saying this benefited print sales at the expense of digital?

I can take both of those. So from a Chinese reform perspective, it's impacted sales this year. It's not massively material in a Pearson scale of things. It's around about GBP 5 million from a revenue point of view. That's partly associated a bit more next year. Actually, as you look at how the reform is working, what's impacting us negatively is the fact that the government is encouraging people not to use tutoring outside school. So sort of pseudo-school environment outside school. And we sell English Language Learning into those schools, and those schools therefore need less materials. What the government is trying to do though is to encourage people to learn in the school environment, but also from a home schooling perspective. So there's also an opportunity in this for us in terms of the home learning space, and that's something that we're looking at the moment. And then from the PLA point of view and that print digital mix, we have seen a decline in print with people moving into digital. It's just not been as acute in previous years. And I think if you look at that screenshot that we shared around PLA, the fact that when you search for it, it was just a lot of print options that came up to you that sound have had an impact you didn't see Pearson+ $9.99 a month, which would have been the most attractive to students from a pricing point of view. So as we resolve that issue, that's going to be positive. Sorry, anything to add?

No, I was going to say, I mean I think on China, I think, there has been a lot of stuff written. And as Sally said, we're marginally impacted by it. And in the long term, given the strength also of the Longman brand in China, there may well be a positive for the business. And we're not as exposed, I think that we're in some of those indexes. But we, as a company, are not as exposed as maybe some others are that are in that index. And you're totally right on the PLA. You've got to imagine that if all you're seeing is print, then there's probably more folks, even though it has continued to decline, more folks probably took a print option, then we'll do once they have the opportunity to access that content via Pearson+.

And just Sarah's last question is DVLA contract. Can you quantify the impact expect in 2022?

Yes. So in the context of Pearson again, not massive. So it's a little bit more than $10 million. Just to actually explain what has happened here. The DVLA -- DVSA contracts used to be -- we used to have the contract for the whole country. Now it's been regionalized. We've won one of those regions, but also we're delivering the kind of technological grounding for the contract across the whole country as well. So it's not a loss contract. It's a change to contract.

And we've got time for one more question, which comes from Katherine from Goldman Sachs. Andy, a question for you. As you build your offering in Workforce Skills, what should we expect in terms of organic investment versus acquisitions thinking of Faethm? And how do you plan to go to market in the corporate space, which is typically very fragmented and competitive?

Katherine, thanks for the question. I think as we alluded to in my remarks, not only is Faethm a very interesting and high-growth business in and itself, it provides abilities that are applicable across the entire company. And Greg and the team are busy at work learning all about Pearson and the opportunities that, that possesses. But particularly, it answers one of the key questions we've heard from employers when we've been going to market over the past several months, which is in terms of we have a large learning budget. We spend it by traditional means. And we're not sure that we're getting the best return on our investment because we're treating every employer -- every employee, rather, in a similar way. What Faethm does is really dive down to understand the learning needs of Katherine, as an individual. And then we can utilize some of the assets we have in the rest of our company to start to provide the learning materials that suits Katherine's particular learning needs, and that's been very well received by the employers. So you're going to see -- I'm not certain we have nothing planned in terms of other investments like that. But I do quite like organic -- or inorganic investments where it adds capabilities above and beyond the business itself -- capabilities across the whole business, and Faethm certainly does that. And so I think you'll be seeing some examples of -- within other divisions of Faethm, adding to their capabilities. And then as we've discussed, we're very much -- we've been engaged for a long period of time with the employer community, the enterprise community, and there are some very, very interesting conversations that are ongoing, have been ongoing, some are quite advanced. And so I think, as we said in my remarks, when we come to do our full year, we will give you a deeper dive into what some of those are as well as also within our English Language Learning businesses. Those are the two that the teams have been working on very, very diligently over the past few months. And so we think by the time we come to the beginning of next year, we'll be able to sort of lift the lid on what we're doing in workforce and English Language Learning. Anything to add?

No, perfect. Thank you.

Okay, back over to Andy and Sally for a final wrap-up.

Well, thank you very much for joining us this morning. Thank you very much. It's great to actually be here in London. And thanks very much for your interest in the company. And of course, Jo and the team are at hand, should you have any other burning questions that you like answered and thanks very much for your interest in Pearson.

Thanks, everyone.