Sanoma Oyj (SANOMA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to this Deep-Dive into Digital Learning. My name is Kaisa Uurasmaa. I'm heading Investor Relations and Sustainability at Sanoma. Sanoma Learning has grown as one of the global leaders in K-12 education. And our latest growth step was announced 2 days ago. Pearson, Italy and Germany businesses, and along with that, also 2030 ambition for net sales growth. And when we talk about learning with investors, we quite often run into same questions a bit. What kind of competitive advantages does Sanoma Learning have in digital? How can we strengthen them? What kind of role does digital play in our financial performance and in particular towards our long-term financial targets. And these are the topics that we would really like to discuss today. And I'm happy to have here with me, Rob Kolkman, CEO of Sanoma Learning; and Alex Green, CFO, Sanoma Group, who will talk you through these topics. And we will start with a bit more formal presentation given by Rob and Alex. It will take approximately half an hour. After that, we will move into a roundtable discussion where we will look a bit deeper into key learning trends, the digital features and financial impacts of digitalization. Already during the presentation and roundtable, you will have the chat function open, so you can place questions to the presenters. And after the roundtable, we will also open the telephone line for further questions. So that can be used as well. And a bit depending on the number of questions, we estimate to round off about 12:30 at the latest Helsinki Time. And when it comes to the Q&A, we would today really like to focus on this topic of digital learning. So in case you have any other questions on Sanoma as an investment on the learning business, we are happy to have those offline from IR after the event. And also to already introduce this as a starting point of a small series, where we will introduce our learning business, so there is more to come during the second half of this year. With this, I would like to hand over to Rob and Alex to start the presentation, please.

Thank you, Kaisa. Good morning, and a warm welcome to all of you from me as well. Today, we really would like to bring to life to you what it means when we talk about digital learning at Sanoma. And of course, most importantly, what does it mean for the teachers in that day-to-day teaching? And how does it help the students with their learning and reaching their goals? So that's very much what we focus on. And of course, as Kaisa mentioned, we will also link that to our long-term financial target. How is that affecting that? Maybe as a start to put it in the right framework, we, of course, are very focused on K-12. And I will talk about that in a minute. And if you look at our strategy, we have three key levers. And the first two are focused around our organic growth. We think about growing the market share and really winning in the local markets. And on top of that, increasing value per student. And what you will see today are specific examples of that, when you think about personalized learning or the role of assessment and additional testing. So that together is that organic growth part. And then on top of it, you see the M&A. And of course, as Kaisa mentioned, I think we had a great example of that earlier this week with the announcement of Pearson, Italy and Pearson, Germany becoming part of our organization. We are very excited about that because we think it fits very well into our growth strategy and also into our K-12 focus.

This leads us towards our learnings long-term financial targets, the organic growth that Rob mentioned, 25%, and our longer-term margin going to up to 23%. But also, as Kaisa mentioned, we announced our growth ambition 2 days ago, which is over $2 billion in net sales target by 2030 with at least 75% of it coming from the learning business.

And let's now zoom in a bit more on K-12. We are one of the global leaders in the K-12 education. And maybe to put it in perspective of what we mean with K-12, the core of it is the 6- to 18-year olds, really in the foundation years of education. But of course, there are also younger kids, let's say, from 4 years onwards, where, if relevant in that market, we also have solutions for that. And if you think about vocational education, so in K-12, your primary, secondary and vocational, vocational can also go, of course, a little bit beyond the 18 years. But the 6 to 18 is really the core focus. And we have, over the last 20 years, really built a unique scale and competitive advantage in this industry, starting very much in highly digitalized countries. And today, you will hear also what we think is the benefit of that where we now move into countries that are more at the start of the digitalization. And let me highlight two what I think are key characteristics of the K-12 market that we really like. And the first one is around high barriers to entry. And that's very much to do with the localized nature of K-12. So that has to do with local curriculum, local content, also, of course, the local language, and really being close to the schools in the different countries. And that is something that is really creating a high barrier, and that's why we are in a very good position on that. And the second one is what I would call stickiness. And stickiness is relating to the teachers only choosing their curriculum, their content every once every 4 to 8 years, dependent then, of course, on the country and the situation at the school. But it's, of course, not in the interest of a teacher to change the method every year. That would not be good also not for the students. So those two elements, I think, are very important to highlight from a K-12 market, why we are also so excited about it. Another point is, and you see that here on the slide is that it's a very fragmented market. So we're mostly operating in Europe at the moment. And you see that although we have made big steps, it's still 16% market share. So there's a lot of consolidation opportunity, we think, in the markets that are left, both in the markets that we operate in and also by new geographies. And the last point I would like to highlight is around the role that learning content spending plays in the overall educational budget. I think it's useful to realize that, of course, which is very logical, the vast majority of the spending in schools goes to the teacher salaries. And actually, the area we play in is about 1% to 3% of the educational spend. So just imagine, if we can make the life of the teacher and the school master and the school more efficient, then, of course, that has a real impact on making sure that a teacher can actually spend more time with the student. So that's very much the focus there. And Alex will highlight a bit towards the margins.

Yes. Thank you, Rob. And as one of the global leaders in K-12, we provide teachers with everything they need to manage their classroom. But how does that connect with our revenues? Here on the table here, you can see on the left-hand side, we've split our net sales for 2021 by three main categories. And you see on the bottom there, the printed and digital learning content. Now this is the workbooks, the exercise books that enable a teacher to manage their lessons, but also the hybrid solution, which we'll talk about more later, where we put digital and content together as a solution sold together. That's in that first bucket. And this content and this offering is put together in conjunction with the teachers, from the teachers and fits into the local curriculum of the specific market we're talking about. Above that, we have the digital platforms part. Now this is where we sell digital platforms on their own. And for instance, itslearning, which we'll hear about a little bit more later, but also administration platforms that enable school administrators to manage the school, for instance, in student data, what class they're in, absences, things like that. That's in that second part. And on the top, we also have distribution services, which is a one-stop shop to enable teachers to get everything they need to manage their lessons. So all this together is a package that enables teachers to function and to do their jobs well. But if we look on the right-hand side, we've done some comparability in terms of margin. So overall margin in learning was 21% in 2021. And you can see there at the top that distribution services and digital platforms are generally below that average. Now that's fairly normal for distribution services and also for digital platforms. But these two parts, they are a significant part of our revenue and part of the whole package that enable us to be successful. But it's the bottom bit, which is the above-average part, which is key to our growth going forward. And that's why, in our M&A strategy, for example, we focus on looking for K-12 content learning businesses, either in markets we already operate or in new geographies to enable us to grow.

So let's now start to bring to life these words that you hear us talk about in the way of offering the best-in-class printed and digital learning services. What does it actually mean when we say we support teachers in motivating the students and teaching efficiently? And what does it mean when we talk about helping every child learn through best-in-class learning materials? What does the parent actually get when you look at our solutions? How can they monitor the child's progress? And I would like to start with showing you a first video, which is from our team in Spain, Santillana. And there will be three things you will see in this video. The first one is around how we actually roll out technology and a platform that we already had called Bingel in primary education into the Spanish market. And at the end of the video, you will hear more on the secondary education market with a solution called Prismas, which is really there to support the children already now in a market that is still very early days in digitalization. And in the middle, you will hear the term [indiscernible], which is very much referring to the new curriculum changes in the Spanish market. And as you probably know, that is a key growth driver in the years to come for us. And therefore, it's good to see what that actually means in a day-to-day life of the students. So let's show the video. [Presentation]

So what you saw here, I think, is really good examples of when we talk about providing teachers with everything they need. It's that combination of content that we can add to interactive whiteboards that might be in the classrooms or additional lesser material for the teacher that he or she can share on laptops or additional learning and homework that the students can do when they get home and do their homework. So all these different elements are being shown here. And I think that hopefully brings to life how we look at that. And that's one way of looking at more focusing on the content side and on the platforms that support it. Another way to look at that is think of it as the day in the life of a teacher and a student and a headmaster and also the parent. And that, of course, already starts with trying to think of where can we make their lives as easy as possible. Coming back to the core element of the more we can simplify it, the more time there is for the teacher and student to focus on the things that really matter, which is, of course, the learning. So that starts already in the morning with doing a very efficient kind of single sign-on in all the platforms that they might use, the attendance list. And then you, of course, get into the real education. And if you think in primary education, it's maths and languages in the morning, and how do you do that in the best possible way? How can you really zoom in on personalized learning experiences there? And throughout the day, also, how can you make the life of the teacher more easy. So you'll see an example in a minute where that is focused around something called a planner. And I think that is a really good example of making the life of a teacher much easier throughout the day. But it doesn't stop there. If you then look at after school, there are, of course, supports for the children when it comes down to their homework. So they have access to all the material at all the time online, wherever they are. And the same, of course, applies for the teacher when he or she wants to do the marking or prepare for the next lesson. And if you look at it from a parent perspective, parents can, of course, check on one of the apps that we have, the progress of their child, and maybe also some specific notes. And all that, of course, is done in a secure and privacy well-done way, which is, of course, very, very important to us and also links to one of our key focuses on the sustainability side. So what I would like to do now is show you a video of one of the solutions we have in this area called itslearning. And itslearning, you will see here really the day in the life of the teacher and the student come to life, so to speak. And then also hear from a couple of teachers why they like it so much. So let's have a look. [Presentation]

So when you look at the video, you see the elements really coming together. You saw the elements around personalized learning always having the up-to-date materials. You saw the example about data and analytics in actually different formats. But all aimed at making the life of the teacher, the administers more efficient, more time, therefore, to focus on the students. And that is what we mean when we talk about better learning outcomes and how we support that and the better efficiency for the teachers. So that's how it links up. And we also do regular surveys to see what teachers think. And just to give you a few key characteristics of that. So 71% of the teachers really agree that the lesser materials help with engaging their students. And 85%, very importantly, agree that it helps with students reaching their curriculum objectives, of course, a core, core part of what we are focused on. And 76% of the teachers agree that learning materials really help them to be more efficient in their work. And let's now bring this back more towards us as a company. A couple of things I would like to highlight. When we talk about that we have built strong digital competencies that we can leverage across the business. So good to realize that 85% of our customers actually pay for a digital component. That could either be a digital-only, but in the most cases, as you saw earlier from Alex, that is actually in that combination of print and digital. And we have over 600 employees working on the tech side, so really developing and improving constantly our solutions in that area. And we spend over EUR 100 million a year on content, which is, of course, very localized and specific for the schools and the teachers for their needs in their curriculum, but then on top of that, of course, with the technology and the common platforms that we have there. And let me zoom in on that for a minute. So when we talk about harmonizing and developing our digital learning platforms, what do we actually mean in that case? And if you look at it from our perspective, we have grown, over the last 20 years, a lot with acquisitions. And as we said earlier, we announced another one earlier this week. And all these acquisitions add new capabilities, fantastic new content, and also technology. And what we are doing over time is making sure that we stop reinventing the wheel. So if I take an example in primary education, and you saw that earlier in the Santillana video, there we have currently over 40 digital solutions. And we are working hard to change that into what we call 15 modules. And when you think about modules, you can really put them together in different ways to make sure that the solution becomes specific to a local market. But the modules themselves, whether it's single sign-on or personalized learning or actually the digital material itself or the testing and assessment, those modules are, of course, standardized. And that's where harmonization really gives us a lot of benefit. Let me then come back to a point that we also shared with you about 1.5 years ago in the Capital Markets Day around the transition from print to digital. And I would like to highlight here that you could look at it from the perspective of there are more two extremes. On the one hand, there is, of course, the markets that are still in the early days of digitalization. But as you saw in the Spanish example, that also means there's still already a lot of digital content. There are a lot that we can support the teachers with. But the core, let's say, business model is still very much around paying for the book. And that's the case in Poland, in Italy, Spain, France and Germany. And that can change over time. And to give you one example there, although Germany is still very much at the early stages here, there's a lot of investment going into the German market at the moment to make sure that they catch up effectively on that element of digital learning. But that also realizes there's another element very important there, which is, of course, the teacher, and changing the teachers' behavior and the teacher getting comfortable with all the technology, very understandably takes time. If you look at the other side of it, you see the Netherlands, which, at the moment, already has over 65% of the learning material sales in a subscription format. And that subscription format is a reflection of the fact that it's really an integrated solution of print, which in a lot of cases is, for example, an annualized workbook, which students and teachers really like, in combination with the online content. And that 65% is actually slightly ahead of the percentage we predicted about 1.5 years ago. So we also see that continuing very well. So that's with regard to leading the digitalization. What I would like to show now is a video of Malmberg, which is our business in the Netherlands, and that is the most advanced on this journey. And let's really make sure that -- put it in the right context, this is really around how we present it in marketing to the teachers, to the schools and what it means for them. And the reason I'm showing it is because it highlights a couple of key elements around that personalized learning, around that access to content all the time. So let's have a look at that video. [Presentation]

So let's talk about how digitalization affects our financials. Keyword here, it stabilizes them. And in a number of ways. So if you look at the left-hand side here, we talk about how we're going to implement the hybrid model where we have digital and print together. Now that enables us to continue our revenues flow in the same way as before, which is different, say for example a different industry, for instance, in media, where you go from print to digital, you have a different business model. So the revenues and the profitability will change and so you have a sort of step change. Here, because we are offering the hybrid, we continue where it was print before, now it's print and digital, and it continues, which means that our 2% to 5% long-term organic growth is able to continue. So that is still -- that continues to be our long-term target. On the right-hand side, we talk about how the revenue stream is stable over time and both through the year and also between the years. Now as we go into this hybrid model, and as you saw from Rob's chart before, as we go from print digital, we move towards a subscription model. And just to explain subscription, means we are selling access. So we're selling access to both print and the digital. Now that means that our revenues can be recognized more evenly through the year. So over time, and it does take time, this will smooth out a little bit, the large seasonalization we currently see in our revenue base. But also over a number of years, as we see now, and we've talked about, and there is often in a market, a large curriculum change every 4, 5 years, which creates an increase in revenue. And then in that same country the next year, it will be not so much. As we go to a point where we have digitalized offerings, you can update the content much more regularly. So for instance, in different years, different subjects can be updated continuously. So that smooths out the revenues also between the different years. And in addition to this, when we have these large curriculum changes, you also have a large expense boost before it to create the content. And so when you have more continuous changes and updates in the digital offering, that cost also spreads itself over time, which also creates a cost opportunity as we can manage our efforts, which is cost creation over different periods. So it's not crammed into a shorter space, we can more efficiently use our workforce, internal and external, to create that content. And thinking again more about our cost base and our unique position, Rob mentioned earlier that our annual investment of about EUR 100 million on content and tech development. And as you see here, roughly EUR 60 million on the local content creation, which as we buy more companies and go into more markets, will obviously continue to increase, and then also roughly EUR 50 million on tech development. Now why is this important? Imagine you're a business in a country or even part of the country focusing on one or two subjects and successfully selling to schools and offering a great service in the print world, but now it's time to digitalize. Now the costs of digitalization are not small. So it would be very hard for that business to digitalize in a way that doesn't affect their profitability and they'll need to find the funding to do that. And that may or may not prove to be a good solution, hence, the consolidation we do see in marketplaces. Now as we're one of the global leaders in K-12, and also we come from a very digitalized background, we have the scale and the ability to invest in this. And as part of this, as you see, we have these centers of excellence in technology across Europe. And connecting with what we were saying, this is where we can create those modules. And those modules, taking in the larger number of tech solutions that we have and that we acquire and filter them down into really key modules like single sign-on, which we can reuse across markets, and that gives us the scale to grow and grow our profitability. And as we announced in our 2021 earnings release, we added an extra EUR 5 million investment in 2020 -- in 2022 to take a step forward in that and really accelerate. And as also, we talked about a couple of days ago, as part of the Pearson Italy and Pearson Germany acquisition, we actually boosted that in order to focus more on secondary education, which before that we had a large focus on primary. We did have some secondary, but this has balanced us more in the secondary focus, and that investment will help us offer great solutions in the secondary education not just for Italy but also for other markets as well. And what does that lead to? That leads to cost efficiency, operating leverage, lower unit costs as we can spread this around. And these platforms with the local content adds up to our growth plan. So what does that mean? We talked about it before. Our 2021 margin is 21%, and we are heading towards our long-term target of '23. And the efficiency I just talked about with platform harmonization and the increased scale, together with organic growth of 2% to 5%, which is increasing market share and increase in sales per student, those two things together take us to our long-term target of 23% margin.

So let's now wrap up this part of the session. And what we've tried to do is really bring to life for you what it means when we talk about digital learning, and the importance of that for teachers and students across all the markets that we are active in. What you've also seen is the highly digitalized countries really supporting the transformation that we then do in other countries like the examples we saw in Spain and also Poland, of course. So let's now continue the dialogue here during the roundtable discussion.

Thank you, Rob; thank you, Alex, for the interesting presentation. And now a reminder to the audience, please use the chat function at this point of time. So we will pick questions to this discussion also already from there. But during the presentation, we saw quite many concrete examples of different types of digital solutions for learning. But I would like to take one step back and look at kind of the overall trends that impact the learning industry and in particular, the digitalization of it at the moment. So Rob, how would you describe those? What are the most important ones?

Yes. Let's start, of course, in the classroom itself, right? I think with the increasing accessibility, let's say, on the WiFi and everything else that is there, there's, of course, a real opportunity for teachers and students to learn in different ways. And that's what we constantly try to follow. And it, as I highlighted, is different in every market, but that's, of course, a core driving factor. It's literally what we see around us. The way we learn, we study is, of course, constantly changing. On top of that, I think, there are two things to mention. First one is around the real shortage of teachers in most of our markets. And that means, when we talk about teachers becoming more efficient, it's also very, very needed because we really need all these teachers to spend as much time as possible on the actual learning. And I think on top of that, specifically in Europe, we now see also an investment throughout Europe called EU Funding around digitalization. That is, of course, much, much broader, and its only a small part also is relevant to us. But I think that is another trend we see, and I mentioned the German example, but I could have mentioned others as well. So I think those are key elements to keep in mind.

Okay. And in particular, with this EU Funding, for example, coming to the market, I imagine that the market is quite competitive. So what is the key competitive advantage that Sanoma Learning then has in this space?

Yes. I think if you look at the way we do it, we really try to use the scale and we continue to build the scale, like we announced this week with Pearson Italy and Germany, of course, constantly build on that scale because as Alex also highlighted, it is really important to have that scale to be able to do the right investments around the digitalization, whether that is the personalized learning or the assessment or all the elements you saw there. And of course, it's linked to the local content, the real deep knowledge we have in the local markets. And that is, of course, in our view, a very unique position compared to a lot of other players.

Good. Then I would like to also include the sustainability angle a bit into this discussion. We know that inequality is a big issue globally. And education is, of course, one of the key tools in improving that situation and enhancing inclusion. What kind of role does digital play in that context?

Yes. I think there are great examples of where digital can really help. We see at the moment, actually, in a lot of our markets, around special education needs. So children that need extra attention in the classroom. And they get, of course, extra help from, let's say, an additional teacher, but there's also all kind of digital tools, whether it's around the assessment, whether it's around helping that child with specific exercises that are aimed at that child in the right way, because that is a very important part, and we see that across the market. So the market doesn't need to be digitalized as such to be able to do that. In Poland, for example, we have great new solutions, because the government is really stimulated around special education needs to develop that further.

Yes. And when talking about digitalization and children, you also become very cautious kind of about data security, privacy, and so forth. So how do you take care of all that?

I mean this is a, I think, crucially, crucially important point. And it's also, of course, part of, when we think about sustainability, we have highlighted also the data and security and privacy. We are constantly working and investing a lot as well to make it as secure as possible. And there's, of course, never guarantees around it. So we are very, very aware how important this is and how sensitive also the data, of course, is that we work with together, of course, with the schools who have a joint responsibility with us on that, of course.

Good. And then if we look at kind of the offering of different digital tools, we have heard about Bingel, itslearning, Prismas, and they all have a bit of a different purpose from the point of view of the teacher or the student. So could you please still clarify that a bit Rob?

Yes. So of course, the overarching theme is we are trying to make the life of the teacher and the student as efficient as possible. But if you look at the different solutions, you mentioned Bingel, that's, of course, very much focused on the combination of our localized content with then the common platform around assessment, around where you saw the gamification, all these great examples to engage children with that. And Alex also highlighted where that fits in the sort of margins that we look at. So that's one part. The other part is really around the day in the life of, as I highlighted. So trying to support it every step of the day, the teacher, the school, and also the student, we're making their life easier and the itslearning example is what was mentioned, but we have several of those kind of solutions across our business. And that links them to the harmonization as well that we are bringing that more together now.

And to add to that, to bring back to that chart, so where we saw on my graph at the beginning with the large proportion of the revenues coming from print and digital platforms, that's where we have the Bingel, for example, where we bundle the content and the platform together, those revenues are sitting in that part, and a bit above the platform part, that's where we have the itslearning, which is sold by itself, and also another one, the administrative one, say for instance, Magister.me in the Netherlands, that platform is in there as well. So that's the distinction there.

Very good. And there was also -- in the chat, there was a specific question on itslearning and its profitability. It's correct that when we acquired it, it was at breakeven profitability more or less. And we see it in particular as a key strategic tool adding to our portfolio. Is that correct, Rob?

Yes, that's absolutely correct. So of course, there's real opportunity from a commercial point of view to roll it out in all kind of different markets. And we do that and we have been communicating about that as well, if you think about, for example, the German market. But what it has also given us, which I think is very exciting and important, is technology and capabilities that we are now using to roll that out, particularly in the secondary education market. So I used it as an example, but we have more of these type of solutions, and bringing them together, harmonizing that on the platform is, of course, very, very good to do and has a real benefit when you think about our longer-term financial targets.

If we talk a bit about digitalization in the schools, how far do you think that, that can go? I mean, do we see 100% digitalized schools? Will it mean death of print?

I mean you probably will be able to find, maybe even now already, a school that is purely digital. But if you ask me what I see in the schools across the countries we operate in and where this is going, it's very much what we highlighted, the blended approach, that combination of print and digital. Does it mean that there would never be a digital-only subject? Of course, there will be. And we also see that in upper secondary education, for example, where the student numbers are getting lower, take here in Infinite, some subjects do go digital-only, but the core of having this local content and, for example, annualized workbook that I used, that's really powerful in the combination with digital. So I think that is very much the combination. And ultimately, we are providing the teachers and the schools with access to the content. And it's also up to them how they want to use and in which combination, which the market can be different because, of course, there's also difference in investment levels and where the government also puts the investment priorities.

And if we stay for a moment with the hybrid model and the subscription model and all that, there are a few questions in the chat around that topic. So maybe I'll start with the hybrid solution, a question that does the hybrid solution actually make sales more sticky?

I think it does. And the reason it does is because, of course, in a hybrid solution, also really go towards over time personalized learning. That means you build up a lot of the school does, a lot of data, a lot of knowledge about that child. So that interaction then with, let's say, the use of your workbooks, but then also following that, monitoring that online, I think that makes it really even more sticky than in general, of course, methods already are because of the fact that the teacher really wants continuity when he or she teaches a certain subject over the different years.

Just to add to that, because on the hybrid, we can do it in a subscription model. And subscription models give you the opportunity to delight your customers, delight teachers sort of continuously with updates, and therefore, I think you're more likely to see people sort of come in and drop out, and they're more likely to be your customers for the long term. You have the opportunity to build that relationship much more strongly, which also creates that stickiness.

That's a good point. And then maybe two further questions. First one, Rob, how do you see Sanoma Learning's position in terms of hybrid model towards competition?

I think we are in a very strong position, and that's very much to do with that combination again. If you look at our position in our markets, we are really leaders in that market, either the #1, #2, sometimes #3 position, but really strong position. So we really have close connections with the schools, with the teachers. And then on top of that, of course, we have the common platforms that we roll out. And that scale, I think, is pretty unique, if you compare it to a lot of other players. Of course, there's competition, and that's also good, nothing wrong with it, but I think we are in a very strong position there.

Okay. And then the second one, that have we seen acceleration in moving to subscription model during the past year in other countries than in the Netherlands you mentioned?

Yes. On the graph, we're showing a couple of countries that are sort of in the middle. And Finland is a nice example where there was upper secondary education rollout of a new curriculum. And there, we've also seen that, that has increased actually the move to subscription. But I'd like to highlight, it's not a goal in itself. It's a really good and useful business model. And I think a proven business model in other markets to follow the actual usage becoming more and more access to the content rather than in one specific format.

And then an interesting point to that still is that are there countries where that would be somehow administrative or political topic even that kind of moving education towards the subscription model, increasing maybe the digitalization at the same time and the benefits?

Of course. I mean let's start with saying education goes to the heart for everyone, right? So it's very logical that this is also an important political topic. That's absolutely understandable. So that also means that in different countries, governments take different views how they want to either support or regulate digitalization. And we do see that and that can either be in the way of -- take Poland, where they're now saying, you really need to make sure, on special education needs, that our content is accessible in the formats that are needed. And that's actually happening more across Europe. So it is different in every market, but I think that's only a good thing because we're in a market that really matters.

Okay. And then talking a bit about different countries, and the process of bringing a new platform into a new market is of interest of the audience. So what kind of investments does the localization of the platform require? And how long do you need to develop for that localization?

Yes, good question. There's no one answer to that, I'm afraid. But if you take the Bingel example that I showed earlier, that is done within a period of 9 to 12 months when you think about the technology, whilst the content is, of course, being developed for the new curriculum that we were talking about. So those things go hand-in-hand. More and more, you will see that we have a continuous update and improvement of our digital platforms as well. That means, if you take Poland, next year there will be a new curriculum there for primary education. We are now in the process of developing, using those modules that I was talking about, developing the new primary method in Poland. So we are very aware that these things can take up to a couple of years from a content point of view to develop. And simultaneously, we develop the learning solutions that come with it.

Okay. Very good. If we move on a bit towards more financial topics. So Alex, could you please still recap kind of the main financial impacts of digitalization?

Absolutely, no problem. So let's start with revenues. Revenues in moving to a hybrid offering of print plus digital, we can keep our revenues relatively stable going forward and growing at 2% to 5%, whereas because we're adding the print to the digital in a way that the teacher then can choose which one they take and the students can sort of pick and choose, versus in other industries where going from print to digital can lead to step changes in revenues and profitability. So this keeps a nice consistent growth. Also, as we talked about, the sort of smoothing across the year and over the years of the revenue base coming from a subscription offering and coming from the fact that over time, and let's keep stressing it does take time, the curriculum changes will become a little bit more continuous subject by subject in different countries, so that you don't see these large bumps. So revenues will become more stable and organically growing at the 2.5%. If we think about expenses, connect it with what I've just said, the continual update means our content creation costs can be optimized and spread across time, so that we can become more efficient. And then, as Rob has been talking about, are components reducing down to simplifying our products and then tailoring them for particular markets, whether it's in putting the right language in, et cetera, and then putting it together with the content, that being able to not reinvent the real, as we said before, each time we do it, enables a unit cost improvement there. And therefore, on margins, with all these things become not only smoother over time, so we do see ups and downs and some jumps. But much smoother over time, and plus the scale and the cost efficiencies enable us, along with the growth, to move towards our higher longer-term margin.

Very good. Thank you. A detailed question still on that, on the EUR 5 million investment in platform harmonization this year. That's a one-off type of investment?

Yes, that is indeed a one-off acceleration sort of item affecting comparability to go into the technical terms. So that's particularly for this year where we are stepping forward, accelerating to create that harmonization, which includes, as we talked about, the centers of excellence around Europe, putting the structure in place and the people in place to curate that.

Okay. And rounding off a bit this roundtable discussion, before we move on to further questions from the telephone line. We have an ambitious growth strategy. So Rob, what kind of role does digitalization play in that?

I think it plays a crucially important role both, as you saw at the start of the presentation, when you think about winning in the local markets, growing our market shares. You can only do that by really focusing on what is needed now for the teachers and the students and that is undoubtedly moving more and more towards that blended approach. And digital solutions will continuously be evolving and improving on that. And we will also be adding additional services. So for that organic 2% to 5% growth, I think it is very, very important. And of course, on top of that, like you saw with the announcement this week, we really like to add markets that are at the core of what we are focused on in K-12. And then to be on that journey again and lead the way there, in this case, in the Italian market. So I think in those several aspects, it plays a crucially important role.

Thank you. And now I would like to actually hand over to the telephone line. So operator, please, if we have questions, we are happy to take them.

[Operator Instructions] And there are no questions at this time. Please go ahead, speakers.

Okay. Thank you. We continue to have a few in the chat. So we will continue with them. Rob, you spoke about the 600+ employees we have working on ed tech. So a specific question on that, how can we attract talent who is able to code and be creative in making this gamified solutions? Because there is, of course, a lot of information in the market that there is lack of developers, for example.

Well, let's start with acknowledging that, that is true, right? I mean there's a real shortage of good developers. But I think here, our scale and also being in different countries really helps. So what we are trying to do is build the center of excellence not in one or in two countries, but really across our different countries. So in Poland, but we also do it in Romania, in Spain, to really make sure we use the whole European base, so to speak, to get the right kind of talent on board. And there's one other element, which I think is really nice to mention. People really like working for education. So we have a lot of passionate people across the organization, but also on the technology side, people really like to develop these type of solutions. So I think that also helps us. But it's very fair to say, also for us, it is always a challenge to find the right people.

Very good. At the moment. We don't have further questions on the chat either on digitalization. I will once more check with the operator if there are any on the telephone line?

[Operator Instructions] And we have no questions at this time.

Okay. Thank you. Then we can actually start to round off the session, and we can naturally come back to any questions that you may have afterwards. One more on the chat side. So on our market share in Europe in K-12, 16% after the recent acquisition, who are the key competitors in that space, not only digital, but overall in the learning business?

I think the way we look at it, the key competitors are more in the local markets, the players that also offer the combination of print and digital. So I won't list all of the local players, but I think that is very much there. And there are a couple of competitors that go across a few markets like Infinitas is one example there. But really, in most cases, we compete with local players, and that's also where our scale, really, in my view, works to our advantage over time.

Okay. And then at least 2 more. So on pricing, in learning overall in the digital learning, how is it developing? Could you give a bit of elaboration on that?

Yes. I think the core thing is that, of course, in our long-term target of 2% to 5%, the pricing is included in that. I mentioned a couple of things that are currently happening in the market around funding that can have sort of one-off effect. But if you look at overall, this is education. So it's very close to government as well. So the price increases are always limited to what we can do. However, when you see changes, and like we see currently with inflation, of course, we also see that markets therefore can, over time, charge higher prices. But we also have to manage our cost base very effectively with it because this is not like we can just pass on these price increases, the inflation immediately. And that's also what we highlighted, I think, in our announcement before.

And then continuing with the development of these digital capabilities and kind of the question is that are we able to develop these now internally with the tools that we have in place and harmonizing all that as we have spoken or do we see room for any bolt-on acquisitions in some of the in specific digital areas?

There are several elements to the answer to that one. So to start with a clear, yes, we are always looking for bolt-on acquisitions that could improve also our digital proposition. So that's definitely a yes. But of course, the more we develop our solutions, the higher the bar becomes for actually adding something to our solutions. But maybe the other side, although not in the question, good to mention is that we also always look for partnerships. So if you take Microsoft Teams during the corona times, we really have integrated that into our different solutions because that was, of course, a core need, and that's an example of communication tool or module, you could argue that, of course, we can best integrate with. And the same applies for some others as well. So there are different elements to that.

Okay. Very good. Now I don't see any further questions on digitalization in particular. There are a few on other topics. As promised in the beginning, we will come back to those offline. So Rob, would you like to round off the day?

Yes, I would like to thank everybody for joining today. I hope we've been able to bring to life for you what we mean with digital learning and how it really impacts the teachers and the students and the schools and also how it links to our long-term financial targets. So of course, as you say as well, the conversation continues. More than happy to answer questions outside of this as well, but this hopefully was a good start in giving you more insight into the learning business.

Thank you, Alex; thank you, Rob; and thank you for the audience in particular. I hope you got insight into our digital learning business. And as said, we would like to continue the discussion. We would also very much like to hear your feedback on this event, because as I said, this was the first one in a series to follow. So in order to respond even better next time, please use a couple of minutes for the feedback. Thank you again. Have a nice day.