Springer Nature AG & Co. KGaA (SPG) Earnings Call Transcript & Summary

Good afternoon, and welcome to the presentation of the Springer Nature Full Year 2024 Results. My name is Thomas Geisselhart, and I lead Investor Relations at Springer Nature. Today, I'm here in Berlin with Frank Vrancken Peeters, our CEO; and Alexandra Dambeck, our CFO. Today's presentation has 2 chapters: a business update presented by Frank and an update on the financial 2024 presented by Alexandra. [Operator Instructions] Before handing over to Frank and Alexandra, I would like to make a few remarks on how we present our financials. For revenues and adjusted operating profit, we present reported numbers and reported changes based on actual currency rates and reflecting the actual portfolio composition during the reporting period. We also show growth rates on an underlying basis, meaning that currency effects and portfolio changes are excluded for a like-for-like comparison. Our new financial guidance for 2025 is based on the expected underlying performance of the business, which means that the impacts of foreign exchange rates and changes in the composition of the portfolio are excluded. And with this, I'm handing over to Frank.

Thank you, Thomas. We're excited to welcome you to our first full year results as a public company following the successful IPO 6 months ago. In the appendix, you'll find a company profile presentation for those that are less familiar with us. To kick off, let's take a look at the highlights of our performance in 2024. Obviously, we're very proud of our results, which puts us at the upper end of our guidance. We delivered strong financial results with revenue growth at 5% and profit growth at 7%. Revenue growth was driven by the Research segment, which grew by 6% and Education by 3%, while our Health business remained stable. Growth in Research was driven by strong performance in our Journals portfolio. During '24, we also achieved an important milestone in our transition towards open access by publishing 50% of our primary research articles open access on the back of very strong article growth. We also maintained our focus on technology and AI to provide more value to our communities and transform the publishing process. Today, we have more than 90, 9-0 AI pilots running across the business. Looking at 2025, we've already seen a solid start to the year, allowing us to expect results in line with our midterm outlook. For those who are less familiar with Springer Nature, let me briefly introduce our company. We're a global leader in the research ecosystem, generating EUR 1.9 billion in revenues with 77% coming from Research. And that's also where 88% of the EUR 520 million (sic) EUR 512 million in profit is generated. We operate in 3 segments, as you can see on the right, Research, Education and Health, each with leading positions in their respective markets. In Research, we're an essential link in the research ecosystem by curating, validating and disseminating knowledge as we help researchers uncover ideas and share their discoveries. In Health, we support practitioners to stay at the forefront of medical science and in Education, we support teachers to advance learning. We're a global company with more than 9,000 employees across 40 countries. We also enjoy a high-quality revenue base with Research contributing 77%. And our revenues are almost equally distributed across the globe. In Research, 62% of revenues are contracted and almost 90% are digital. Let me now briefly explain our strategy on the next slide. Our ambition is to outperform the market while growing responsibly and sustainably. We focus on 3 key areas in our strategy: one, driving the transition to open access; two, leveraging technology and artificial intelligence with our domain expertise; and three, ensuring that Springer Nature continues to be a great place to work. We are driving OA because it provides greater value to our research communities with more downloads, more citations and much greater public awareness. At the same time, OA allows us to better align the value we deliver publishing articles with the revenues we generate. With technology and AI, we provide value-adding services to our communities across our 3 segments. In Research, it allows us to transform the publishing process, improving productivity, speed and quality. And finally, as a people's business, attracting, developing and keeping talent is key to us. Our colleagues not only have substantial domain and technical expertise, but they also hold deep relations and high-quality relations in our communities. In 2024, we strengthened our team with 3 new executive leaders. Alexandra, of course; and Maria, our new Chief People Officer, where he hired for retired predecessors. And finally, Saskia joined in a new role as Chief Digital Officer. These 3 strategies allow us to increase our performance while growing responsibly. In 2024, we retained the highest reputation within the publishing industry. We saw continued high author satisfaction, and we received a gold rating from Ecovadis for our strong commitment to sustainability. We operate 3 divisions: Research, Health and Education. Each of them have strong brands, leading positions in their respective markets, and they enjoy strong underlying growth drivers. We achieved overall revenue growth in 2024 of 5%, the result of strong growth in our Research division at 6%, driven by the strong performance in our Journals business. Education grew 3%, driven by strong growth in India and Southern Africa. And finally, our Health business stabilized following further normalization of advertising budgets of our big pharma customers. Let me now give you a more detailed update on our business progress, starting with Journals in Research. I'm pleased to share that we saw excellent results in our Journals business. Our article growth of 16% was twice as high than the market. And also, we grew our OA share of Springer Nature articles from 44% in 2023 to 50% in 2024, a great milestone. Let me share some highlights along 4 topics on the left side. First, quality. We're proud to have 47 journals leading their impact factor category as the #1 journal. And we continue to lead the top 50 impact factor space with 23 journals, demonstrating the distinctive quality of our premium journals. Second, new launches. We successfully launched 3 new Nature titles, Nature Cities, Nature Chemical Engineering and Nature Reviews Electrical Engineering and 65 new fully OA journals, allowing us to secure and expand market share in these areas. OA transition. We had 66 transformative agreements in total, which allowed us to drive the OA transition at scale across all continents. The U.S. saw the most activity in 2024, including a TA with Lyrasis that covers 120 institutions. Europe continues to be the most mature transformative agreement market. Finally, research integrity. We made significant investments in our research integrity by scaling our direct specialist team and implementing more automated checks. We also actively contributed to the STM Integrity Hub, a cross-publisher initiative to support research integrity across the industry. Finally, we published our first editorial DEI report in 2024, affirming our commitment to serve a diverse and global research community. Let's take a look at our books and services business on the next slide. Starting with books, about 70% of our book revenues are now digital. Overall, we saw an accelerated decline in print despite a good year-end finish. Demonstrating the value of our content, we have seen 35% growth in the usage of our e-books. And to support revenues going forward, we have already secured more than 16,000 contracts for new books, allowing us to publish about 14,000 books per year. We've also launched 2 new e-book collections for 2025, artificial intelligence and mechanical engineering. And another business model improvement is the Access and Select offering, which allows evidence-based purchasing decisions for libraries. Let's move to services. As a reminder, early in 2024, we divested our AJE business, which was part of our services. This unit was negatively impacted by the emergence of AI. As you can see on the right, we have seen good growth in our sponsored events and conferences businesses, where we saw an increase of 43% in the number of events in 2024 compared to 2023. At the same time, our advertising business faced headwinds because of a further decline of marketing budgets in our key markets, for example, suppliers of lab equipment. Our data and analytics products have seen good renewal rates and we were able to secure new customers. Nature Research Intelligence, our new solution that provides researchers and decision-makers with data-driven insights has effectively deployed AI. And looking at a new AI solution, our Nature AI assistant, helping researchers with the reading and writing part of their research, I'm pleased to say that by the end of 2024, about 600 researchers tested our pilot and an overwhelming majority, 81% reported that would save them time. The open beta launch is expected in the second quarter of the year. Let's now move to Health and Education. Overall, our Health business remained stable. Within Health, our international pharma unit successfully refocused on more sustainable budget of pharma headquarters and the associated medical affair departments. Unfortunately, we also saw 3 key pharma customers canceling their unsuccessful clinical trials. Cureus, our digital-first medical publishing platform saw strong growth driven by increased submissions and 39% growth in publications. Our advertising revenues declined due to further normalization of the advertising budgets of our big pharma customers and new health insurance legislation in Germany. Against this background, we have been able to maintain our profit margin in Health despite flat revenues due to strict cost management like streamlining our organization. Now turning to Education, where we saw a growth of 3% in 2024. Growth was driven by strong performance in India and Southern Africa, leading to an expansion of open market revenues. And as a result, open market share grew from 72% to 84% in 2024. This positive momentum was partly offset by the loss of our Conaliteg government business in Mexico. We continued our journey of digitization in education with the global rollout of the Macmillan Education Everywhere platform and MAIA, the Macmillan AI Assistant for tutors. And finally, we improved our profit margin in Education by just over 1% because of a comprehensive cost management program called ELEVATE. And before I hand over to Alexandra to discuss our financials in more detail, I would like to touch upon our progress with AI, which we see as a great opportunity for Springer Nature. As I've told before, researchers don't like to write and read. They like to do research. And in research, AI is allowing us to transform the publishing process by improving quality, speed and efficiency. The backbone of this transformation is Snapp, which is our homegrown submission to accept system supporting more than 1,000 journals and 1 million submissions in 2024. Let's take a look at some of the highlights from the publishing workflow. To support manuscript submission, we launched the journal finder, which helped authors find the most suitable journal in our more than 3,000 journals. Also, as part of the submission process, we have developed research integrity tools, helping us to check over 2 million end manuscripts in 2024. At the peer review and acceptance stage, we launched our AI-enabled editorial assistant called ARPI, which helps editors with quality checks. Another tool we launched in 2024 is our transfer recommender called T-REX. And with T-REX, we're effectively automating the cascading and transfer process. In article production, we used a tool called ACDCx, which allowed us to automate the type setting of about 1 million pages, saving 60% of production cost compared to pre-press vendors. And finally, to drive AI adoption and experimentation across the organization, we launched our own AI Academy, which trained close to 2,000 employees last year, and we also made a set of AI tools available to all employees. That concludes the business update. I would now like to hand over to Alexandra to discuss our financial results.

Thank you, Frank. I'm happy to share further insights into our annual results. As Frank said, we delivered really strong performance this year. We reported revenue of EUR 1.847 billion and adjusted operating profit of EUR 512 million, including scope changes and actual currency. This reported revenue represents an underlying growth of 5% compared to 2023. And the adjusted operating profit reflects an underlying growth of 7%, benefiting from our operating leverage and efficiency measures. This led to an expansion of the adjusted underlying operating profit margin by 63 basis points to 28.3%. Our free cash flow improved substantially by EUR 54 million to EUR 219 million. And driven by our strong performance and proceeds from the capital increase at the IPO, our financial leverage ratio decreased to 2.3x. Thanks to our enhanced financial performance, we were able to raise adjusted earnings per share by EUR 0.52 to EUR 1.09. Let me show you on the next slide how the actual results convert into a like-for-like logic so that we can compare to guidance. Firstly, we successfully delivered what we promised and achieved results in the upper part of our guidance. You can see above circled in green, the guidance range given at the time of the IPO and next to it, the performance delivered in the year. We achieved revenue of EUR 1.842 billion and adjusted operating profit of EUR 516 million, both at the upper end of our guidance range. Considering also foreign currency effects, reported revenue shown on the left at actual FX rates amounted to EUR 1.847 billion and adjusted operating profit to EUR 512 million. And as mentioned by Thomas earlier, we refer across our presentation also to growth rates on an underlying basis, meaning currency effects and portfolio changes are excluded for a like-for-like comparison. This view for 2024 is provided on the far right-hand side with EUR 1.838 billion in revenue and EUR 520 million adjusted operating profit. The next slide provides further insights into our segments for reported as well as underlying revenue and adjusted operating profit growth. As Frank described, we had a really strong year in our Research segment, and all other segments performed in line with their respective market trends. You see here in the right-hand column that Research was the primary driver of our underlying group results, delivering 6% revenue growth and nearly 8% growth in adjusted operating profit. The Education segment also demonstrated good performance, achieving 3% revenue growth and 17% adjusted operating profit growth in key markets, while the Health segment remained stable despite a challenging market environment. And at the bottom right, you see the group's underlying margin grew by 63 basis points, as mentioned before. Our stable reporting group results in the middle columns here were mainly influenced by scope changes following the divestments of the transport business and AJE within Research. Additionally, adverse foreign exchange effects played a role. Research was impacted by a weaker U.S. dollar and yen as well as a stronger British pound as we have a considerably higher cost than revenues in British pounds. In Education, a weaker Argentinian peso was the most relevant. So it has been a strong year. And on the following slide, you see the key characteristics of our revenue model, which is a key driver of this performance. As Frank highlighted earlier, we maintain a significant portion of recurring revenue, supported by a well-diversified geographic customer base and strong cash generation. As you see on the left, more than 50% of our group revenue was contracted. And within Research, that level is significantly higher with 62%. We enjoy a well-diversified geographic base and all this leads, as you can see on the right, to a strong cash performance, resulting in EUR 219 million free cash flow in 2024. And this free cash flow is a significant improvement over the previous year. This was driven by strong operating results, favorable developments in working capital and a reduction in one-off expenses counterbalanced to some extent by increased tax payments. Our financial leverage has continued to decrease to 2.3x, supported by positive operating results and approximately EUR 400 million in debt prepayment, funded by net proceeds from the IPO of about EUR 197 million and free cash flow. We remain committed to our midterm leverage target of 1.5 to 2x. And turning back to the P&L. We delivered a substantial improvement in adjusted net income for the year. You can see near the top of the table, this reflects the improved financial results following the refinancing at the end of 2023, partially offset by higher income taxes. And at the bottom, you see this resulted in an adjusted earnings per share of EUR 1.09, an increase of EUR 0.52 over the prior year. Looking next to our dividend policy. For the year 2024, the Management and Supervisory Board will propose a dividend distribution of EUR 0.13 per share totaling to EUR 25.9 million. And to confirm our midterm guidance, we intend to distribute around 50% of our adjusted net income and dividends will be distributed from capital reserves and will be exempt from German dividend withholding tax. And finally, a few words to our financial outlook for 2025. Our financial outlook is based on underlying performance. 2024 reported revenue and adjusted operating profit here on the left-hand side are therefore retranslated using recent constant currency rates and adjusted for change in scope. Scope adjustments primarily relate to the AJE divestment and amounts to minus EUR 3 million in revenue and plus EUR 2 million in adjusted operating profit. For the constant rate scenario, please bear in mind our methodology is using prior year rates for comparison, and we consider in addition the following adjustments. So FX rates for revenue earned from deferred revenues is adjusted to constant rates. And then in addition, for Argentina, we switched to current year forward rates and accounts receivable and accounts payables at spot [ rate ] evaluation was eliminated. These FX impacts are impacting revenue with EUR 9 million and adjusted operating profit with minus EUR 7 million. This translates in a guidance base of revenue at EUR 1.835 billion and adjusted operating profit of EUR 508 million. On this basis, we expect for 2025 revenue in the range between EUR 1.885 billion and EUR 1.935 billion and an adjusted operating profit margin at least at the level of 2024. This reflects our assessment of the positive dynamics in the market as well as the continued investment in our future growth. It also allows for the costs related to the first full year as a listed company as well as the benefits of the efficiencies and process improvements we continue to deliver. And as you can see here on the right, our midterm guidance for the next 3 years remains unchanged. With that, back to Tom.

Thank you, Alexandra. Now the call will be open for questions. [Operator Instructions] And with this, I hand it over to the operator.

[Operator Instructions] The first question comes from George Webb, Morgan Stanley.

Yes, I'll kick off with 2, please. Firstly, just on the 2025 guidance on the revenue growth, noting that implied range of 2.7% to 5.4%, I think, on an underlying basis. I guess my question is around the width of that guidance range, particularly in the context of other peers. Informa, I'm sure you've seen a guiding around 4% underlying to Taylor & Francis. I think with RELX expect around 4% as well. You've talked to that expectation to outperform the market over time. So wondering if you can piece together how you thought about constructing the width of that 2025 range. And particularly at the low end of the range, what needs to go less well this year, either at the company level or at the market level that might bring up a 2.7% type of number? Second question, just bearing in mind that discussions have moved along a little bit in the number of months around U.S. research funding, NIH impacts and things. Just curious at a very high level, the latest you have on how you see those dynamics evolving?

Yes, George, thank you very much. I suggest I'll start with the latter one and then Alexandra, you can come back with the first one. So yes, good question. Let's say, the dynamics in the U.S. and how they relate to Springer Nature. Maybe a couple of comments to make to put things a little bit into context. So I think it's fair to say that we operate in a resilient industry. Typically, over the past decades, growth in GDP let's say, roughly 3% has translated into growth in research and development, about 4% has resulted into article growth of about 5%. Second, if you look at research publishing, it's actually less than 0.1% of global research and development funding and library budgets typically account for less than 1% of their respective institutions. Third, if you look at research publishing, it's actually a geographically well-diversified industry with roughly 1/3 coming from each continent. And last but not least, what we have actually seen in periods of uncertainty, and I think the last pandemic is a good example. We've actually seen an increase in research output, leading to more manuscripts. Now if we look at Springer Nature specifically, I think it's important to note that in our case, U.S. revenues account for roughly 24%. And I think it's also important to note that about 2/3 of our U.S. research revenues are sitting actually in multiyear contracts. It's actually 70%. And out of those 70%, close to 80% have already been renewed and invoiced. The remainder, most of them have actually already a commercial agreement, and we just need to do the administrative processing. I think also the good news is that, let's say, for active renewals in 2026, we actually don't have that many U.S. customers that are relevant. So in that sense, it puts Springer Nature in a good position. I think point number three for Spring Nature specifically is the fact that a little bit over, let's say, a low double-digit number in terms of article output is actually coming from the U.S., which is not unsimilar to, let's say, RELX, Wiley and the others. And roughly 1/3 of those are actually published in full open access. Now if you look at the total number of Spring Nature articles, only a relatively low single-digit share is actually a result of direct U.S. government research and development funding. And if you look at the NIH-funded articles, they are roughly 2/3 of those. So basically, you talk about, let's say, 6% to 7% and around 4%. Now if you look at 2025, as I said, we expect relatively limited impact because as already mentioned, most of the renewals have already been done, and that's a significant part of our U.S. revenues. I think it's also important to note that actually the open access revenues are typically paid by, let's say, direct funding for research grants. So they're not sitting in the indirect cost. And I think last but not least, we've actually seen pretty healthy submission growth in 2024 and continuing so far in the first quarter in 2025. And obviously, if you look at the longer term, of course, if it results in significant cuts in federal research and funding, it could have an impact, and the same is true if library budgets will be impacted. But I think it's also important to realize that under the previous Trump administration, we've actually seen an increase in research and development funding of about 4%, which was actually twice as high as the Obama and Biden administration. And we should also not forget the impact of corporate research and development funding, which in the U.S. is actually 4x as high as government research and development funding. And I think another point is, yes, we have seen quite a lot of pressure in certain areas of research, whether it's research related to climate, whether it's research related to infectious diseases. But I think at the same time, there might also be an opportunity with increased research, for instance, in technology or energy. So in that sense, it's making sure that our portfolio is focused on the right areas. So that's where we are at the moment. I think short-term, limited impact. Longer term, unclear, too early to tell, but maybe challenges, but also opportunities. So I think that probably gives you a reasonable perspective on our position versus what's happening in the U.S.

I will take the second question. George, this is Alexandra. Let me add a little bit more color around your questions regarding the guidance. I think it's important to note really our guidance is in line with our confirmed midterm outlook. What you have to bear in mind a bit is it's quite early in the year, and last year's guidance was given in October, hence, the wider range. Our expectations currently in terms of revenue are gearing towards the midpoint of the guidance and our ambition to outperform the research market by around 1% remains unchanged. And to get some light on how we started into the year, we had a good start into the year, and we see continued growth from our Open Access business and also our renewals and the progress that we are seeing there is at the same level what we have seen last year, around 80%. And we also do expect that Health and Education will contribute to our guidance in line with their respective markets. In addition, we also remain committed to expand our margin. But at the same time, we want to keep currently our flexibility if we see opportunities to expand or to invest into the business. But again, when you would have a look at the midpoint of our guidance, again, that would assume a margin expansion.

The next question then comes from Sami Kassab, BNP Paribas.

At the midpoint of your guidance, what type of organic revenue growth do you expect for Health and Education? You just said to contribute in line with the markets, but does that mean growth or decline? Can you provide a little bit more color on Health and Education organic revenue growth at the midpoint of your guidance? And secondly, can you possibly provide a little bit more color on year-to-date trends within Research in terms of are we still double-digit volume growth in Open Access and books declining and nature growing? Any more color you could provide at the subsegment level would be great.

Yes. Thank you very much, Sami. Maybe just -- the quick and easy one, if you look at Health and Education, you should think about growth of about 3% at the midpoint. If you look at, let's say, Research, how are we doing year-to-date? Well, as I mentioned earlier, we had a solid start of the year, which confirms our guidance that Alexandra just explained. I already talked about the fact that, let's say, more than 80% of our contracted revenue is already invoiced and the remainder, in most cases, is already commercially negotiated. Just the administrative work needs to be done. I think on full OA, I think it's fair to say that the great momentum is continuing. We saw strong submission and article growth in the last quarter, and that essentially continues in the first quarter as well. The underlying dynamics are changing a little bit. I think it's fair to say that last year, we saw quite a -- let's say, significant loss of share of the pure OA players. What we're seeing now is that probably they have reached their low point, but we're actually seeing more market growth. So the market growth according to our information on full open access was about -- is now about, let's say, 8% for the year-to-date. So that's positive compared to 3% last year and flat the year before. On books, yes, we saw a significant decline in print in the first half of the year. We saw a gradual recovery in the second half of the year. We actually saw a little bit of a positive in the last quarter in terms of print books. So that's positive as well. And then if I look at the Springer and Nature portfolios with the transition to transformative agreements, we expect those to actually operate in line with our longer-term outlook for those portfolios as well.

The next question comes from Steve Liechti, Deutsche Bank.

Just you talked about submission growth. I might have missed it, but have you given a figure for submission growth in '24? And then any color on year-to-date an actual figure? And then secondly, just on margin, I just wanted to double check. When you say midterm now for the 1% increase, do we take our base year as '24. So effectively, that's 24% to 27%, just to clarify that, please.

Yes. Maybe a quick one on the submission growth, Steve. It's essentially 2.3 million submissions, which you can actually see on the Page 36 of the presentation.

And I will take the second one. So Steve, the base for our midterm outlook is [ '25 ]. So we expect to extend our margin by 1 percentage point over the next 3 years. And the way how we look at it will be then the accumulated improvement that you will see on an underlying scenario in each of the respective years.

The next question comes from Roman Reshetnev, Goldman Sachs.

I just also have a couple of questions. First one would be on free cash flow. It looks like it improved a bit more than expected, supported by more favorable working capital dynamics during Q4. So looking ahead, do you expect free cash flow to grow at a premium to operating [ profit? ] Or do you presume any components to reverse and put some downward pressure on cash generation? And the second, I guess there was a recent Wall Street Journal article highlighting concerns over the rapid growth of academic publishing, including issues of quality control and editorial resignations. And the Springer Nature was cited in the article with references to journals being delisted or investigated. So given this scrutiny, do you see the pace of current submissions and overall volume growth as sustainable going forward? And do you see the need to apply more proactive measures to the research quality control?

Thank you. Roman, let me start with the free cash flow question and to put some perspective on that. Yes. As you can imagine, I'm very pleased with our performance on free cash flow in 2024. And it has been nicely in line also what we talked about earlier. So with regards to working capital, it turned out that we had no additional working capital needs for Education. So ultimately we came in then flat with regards to working capital. And that's the kind of ambition that we also have for the future. When you think about the dynamics in our working capital, so structurally, we should be negative on the Research side. We had slight requirements on the Education side. But all overall, I would explain -- expect to remain flat on that. What you have to bear in mind when you think about the operational part of the free cash flow, that has been just the dynamics that I explained. Timing-wise, and you also see when you go back to the slide where I explained the revenue characteristics and how this is translating into cash flow. Q1 and Q4 are always the strong quarters in our free cash flow generation, and I remain -- I expect this will remain intact. Nevertheless, you also have to bear in mind considering the size of the contracts that we are negotiating, there could be timing impacts and things could slip from one quarter into the other. So that's just something conceptually and from a timing aspect also to be considered. For the free cash flow as a whole, the driver also for the years to come will be the improvements that we see in our operating results. Last year, we had increased number of one-offs. You might remember the additional payments for the U.K. pension funds, the refinancing costs. This has been drastically lower this year, and I also do not expect in the foreseeable future something like this to repeat. Something to be considered in addition for the development of the free cash flow will be the development on interest payments because you have seen we continue our trajectory and further reducing our debt. Due to the lower leverage ratio, we will also see an improvement in our interest rates. And that ultimately will contribute then also to the interest payments that you are seeing and is an additional driver for improving our free cash flow. And regarding the tax payments, you know what has been our guidance on that, and this remains intact. So just to give you a bit the compositions and the areas of improvement that we do see for the free cash flow.

Yes. Thank you, Alexandra. So research integrity, of course, a key topic for us because at the end, our reputation is our most important asset. If you look at research integrity, basically, we talk about 3 different types of cases. First, we talk about an author making, let's say, a mistake, which can happen. Second, somebody changing the outcomes of an experiment on purpose to still be able to publish an article. I think those 2 cases will always continue to happen and they always happened. The third case, which is something that was, let's say, more emerging over the past couple of years is the case of paper mills, which is basically, I would call it, organized crime to basically sell fake articles to authors to get published. And if you look at Springer Nature, I think we've always been at the forefront of, let's say, being transparent, but also being open. And I'm very happy to say that we have actually created a site -- website, which you can visit where you can actually see what we're doing on research integrity, where we actually also transparently talk about the number of cases we have seen and the number of retractions. Maybe to put things a little bit in perspective, I already mentioned earlier the 2.3 million submissions we had last year. That led to 480,000 publications. And last year, we had about 3,000 retractions altogether. Now it's important to note that those 3,000 retractions don't relate to the publications in 2024, but they relate to all the publications we have made in the past as well. So we talk about millions. So as a percentage research, the retractions are an extremely small percentage of the overall total. At the same time, every retraction is one to many. So that's why we invest. We invest in people. I already talked about, let's say, the direct team that we have under the leadership of a gentleman called Chris Graff. We have expanded the team to about 50 people today, but we also have an extended team, both internally and externally, just a bit over 300 people. And we have actually also made significant investments in AI tools to safeguard, let's say, research integrity. And some of those are, for instance, things like SnappShot, which identifies fake images. We have a tool called Geppetto, which looks at, let's say, fake text. We have a tool called [ Iceberg ], which is effectively targeting paper mills because it looks at patterns and submissions. We have a tool called [ Referee ], which looks at the -- whether the references are correct. So I think we are doing everything as a company, but also together with other companies in the industry through the research integrity to fight research integrity. And I think we're on a good path. I'm not going to say we're over the froth, so to say, because that's dangerous. But I do think as an industry, we're all committed to basically attacking research integrity. And I do think that publishing more articles doesn't mean that you compromise on research integrity. That's not true. Because whether you publish 1, 2 or 3 articles, you just want to take the same rigor in publishing that.

The next question comes from Conor O'Shea, Kepler Cheuvreux.

Two questions from my side. Could you just remind us what your exposure to -- in proportion of revenues is to Japanese yen in Research and at a group level, please? And also if you have any updated comments on the likelihood of you doing any licensing deals with LLM models in 2025 or thereafter?

Yes. Well, I will take the second one first, whether we're doing any licensing deals. I think we're open to those. I think our position on licensing deals has not changed, and we are in discussions with companies. And if you think about the fact that we publish about 14,000 books per year, I think, obviously, we're an important party to talk to. What is really critical for us is that there's appropriate attribution to the original author that is really critical. By the way, we actually did some research of authors recently, which was just completed. And it was actually positive to see that about 2/3 of book authors are actually positively towards -- have a positive attitude towards their, let's say, book being included in LLMs. So that's actually a positive as long as there's proper attribution. And of course, also, we need to make sure that they get the proper royalties for that. So from that perspective, we're still in discussions. At the same time, I think we're also a little bit wait and see because we're also working on our own Nature Research assistants and other AI tools, which, of course, we don't want to -- we want to take maximum advantage of our own content. So that's where that discussion or that topic currently stands.

Then I take the yen question. So Conor, the proportion of yen for our group revenue is around about 3% to 4%. And when you think about the development of the euro-yen exchange rate and the impact on revenue, the kind of rule of thumb to look at that would be an increase or decrease of JPY 5 would result for us in an increase of revenue or a decrease of revenue of around about JPY 2 million. And then the corresponding adjusted operating profit impact would be around in the same direction, EUR 1.5 million. So we are currently long on yen, and this is then also explaining the impact that we see directly on the adjusted operating profit. With regards to the development impact, so we expect to be more or less stable with regards to the proportion of yen to our group revenue.

The next question comes from Konrad Zomer, ODDO BHF.

The first one is about your Open Access revenue growth. I think you reported 44% growth in the first half, and you indicated at the time that it was likely to slow down in the second half. Can you give us the growth rate for the full year, please? And my second question is on your AI initiatives. You mentioned 90 in this call. I think you mentioned 65% at the IPO timing. Have you noticed any tangible revenue contribution yet from the AI features that you have now embedded into your products, please?

Yes. So on the OA side, yes, we indeed showed the revenues for the first half of the year, 44%. We don't show any more let's say, details behind -- below the research level. But if you look at publications, we have continued to see strong publication growth throughout the year and strong submission growth throughout the year. As I mentioned earlier, the dynamics around, let's say, full OA growth are changing a little bit from, let's say, us taking away share as a result of the full OA players contracting towards us taking share and the market growing overall. So I already mentioned that this year, year-to-date, we have seen market growth. And at the same time, we also see, let's say, a payoff of the investments we are having made in launching new journals. We did 66 last year. We had also quite a high number the year before. And of course, we have expanded our footprint in Asia, but most importantly, of course, India and China. So in that sense, let's say, it's -- the momentum is longer, prolonging longer than we expected originally about 9 months ago, which I think is a positive. Your next question around AI. Yes. So basically, we've expanded the number of pilots, both across the publishing workflow, but actually also in our units, like, for instance, I gave the example of MAIA in Education. I think it's fair to say that if you look at the impact of artificial intelligence at this stage, I don't think we can attribute, let's say, an additional revenue line to that. That's not true because if you look at, for instance, Ask AskAdis, it provides more value to customers, hence, leads to higher renewal rates, but it doesn't generate a stand-alone revenue line. Indirectly, of course, if we look at something like T-REX, it does actually allow us to publish more articles. And that, of course, does support revenue growth. And especially if I look at the cascading and the transfer process, we're actually seeing quite some positive momentum there as well. Last but not least, of course, AI is also helping us to improve research integrity, which is, as I mentioned earlier, quite an important one for us as well. I talked about Nature Research assistant, which I think is a positive development. We're expecting the beta launch in the second quarter this year. My expectations in terms of revenue growth is that I don't think it will be a big revenue growth driver this year. And also next year, I think our prime focus would be on driving penetration for that new service.

The next question comes from Nick Dempsey, Barclays.

So my first question, I guess it looks in Q4 as though Research achieved 3% organic revenue growth after doing 7% for the first 9 months. I guess a lot of those revenue streams in there are pretty predictable and stable through the year. So was it a big slowdown in full Open Access that drove that difference or something else going on? And the second question, just in terms of the tax rate for 2025, you talked in your IPO prospectus about a one-off benefit for tax in '25. Can I just understand, is that going to show up that lower tax rate? Is it going to show up in 2025 in your adjusted tax that goes into the adjusted net income calculation or just the reported net income line in the P&L? And then lastly, is it a benefit at all in cash tax? Or should we ignore it in cash tax?

Yes. Thank you. I will take the first question. If you look at the first question, indeed, our growth in Research was 3%. It was actually driven by -- compared to 2023 in the last quarter of 2023, we had actually quite significant one-offs. Now the last quarter in Research is always is a quarter where libraries, but also others are spending their end of year money. And in Q4 '24 versus Q4 '23, there was about EUR 10 million less one-off revenues coming from various sources, whether you look at things like archival product sales or it's actually revenues that we got from third-party distributors, copyright fees and a little bit of advertising. So actually, the -- let's say, the reduction was more sitting in the one-offs in our normal portfolios than actually in the full Open Access portfolio.

I'll take the tax question. So Nick, first to shed some light on the impact that we were talking to for '25 at the time of the IPO. So after the change in our finance structure and conversion of the shareholder loans and the B shares from our major shareholders into equity, we are now in a position that we can form a tax group in Germany. And this will allow us then to utilize the losses carryforward that we have at the KGaA level. And this ultimately is triggering then a deferred tax income in '25, and we're now going to implement this tax group. And with that also reduce a tax rate into an area we're talking about 21%. It would come down to. You're rightfully connecting this to the adjusted net income. We have not defined that line as an adjustment yet. So it would be not adjusted in our calculation. Nevertheless, just think about the way how we talk about our dividend policy, we are talking about around. And what is important for us and also in terms of consistency and reliability for our shareholders, we want to make sure that we have a consistent improvement in our dividends that we are paying so that ultimately, when we have these kind of exceptions, we are not adjusting for in our adjusted net income, there could be a way to think about a percentage. I'm not saying something now instead of the management or the Supervisory Board, it's ultimately up to them to make a proposal for what will be the dividend proposal. But this is the way how I would connect the dots and think about it, how it will ultimately then impact the adjusted net income. Does this provide sufficient color, Nick?

Also about the cash tax. So when I'm flowing -- when I'm trying to link the P&L tax rate into the cash tax rate, am I working with 21% or 32% or roughly 30-something?

Yes. So what you have to think about is the cash tax impact, it is deferred taxes. So it has not a cash impact. So that's the first important thing to consider. And the guidance that we also have provided on the tax payments remains intact. So we expect that it will grow with a low single digit based on what we have seen in '24. So this also remains intact and is not impacted by what you have -- it is impacted, but this is already factored in what we have provided as guidance in how the tax payments will further develop.

So thank you for the Q&A session. As there are no more questions, I'd like to hand it back to you, Mr. Geisselhart.

Thank you. Okay. So this concludes our today's call. Thanks again for dialing in, and goodbye.