Sami Kassab

Sami Kassab asked about the structural potential for STM to reach 8% growth like other divisions, the internal impact of AI on content creation, marketing, and technology layers, including potential productivity gains, and the copyright regime for open access articles, specifically whether publishers can control it or if it's imposed by funders.

Answer

CEO Erik Engstrom stated that STM has the long-term potential to reach 8% growth by leveraging AI-driven digital tools, though it will be a gradual process due to industry complexity. CFO Nick Luff explained that internal AI use enhances products by processing more content and drives efficiency across operations, enabling cost control below revenue growth. Luff also clarified that the vast majority of open access articles are subject to copyright, and RELX offers a spectrum of choices around copyright based on customer and funder requirements.

Sami Kassab from BNP Paribas inquired about the structural potential for the STM division to reach 8% growth, the internal application of AI for content creation, marketing, and technology, including productivity gains, and the copyright regime for open access articles, specifically regarding publisher control versus funder imposition.

Answer

CEO Erik Engstrom stated that STM has long-term potential to reach 8% growth by leveraging AI-driven tools, though it will be gradual due to industry complexity. CFO Nick Luff highlighted internal AI opportunities for process efficiency, content processing, and cost reduction, enabling continued cost management below revenue growth. Luff also clarified that most open access articles are subject to copyright, with publishers offering a spectrum of choices based on customer and funder requirements.

Sami Kassab asked for an update on the test prep business launched in April and whether it is performing as expected.

Answer

CEO Omar Abbosh described the test prep business as currently small, focusing on integrating various Pearson offerings into a singular package, including the Pearson Skilling Suite platform. He stated that it's an area of continued investment but remains relatively small in the overall context of Pearson's business.

Sami Kassab, via written questions, asked about sustaining growth in Clinical Assessment and UK Qualifications, the H2 outlook for U.S. Student Assessment, the scale of the VUE Test Prep business, and the share of Inclusive Access in U.S. Higher Ed.

Answer

Art Valentine, President of Assessment & Qualifications, confirmed strong trends in Clinical and UK Quals, and stated U.S. Student Assessment is expected to return to growth in H2. He also noted the VUE Test Prep business is scaling and will contribute to H2 results. Tom ap Simon, President of Higher Education, confirmed Inclusive Access (IA) was mid-30% of the business last year and grew 21% in H1, highlighting its strategic importance in winning adoptions.

Sami Kassab asked about Wiley's revenue exposure to U.S. institutions, particularly medical libraries, the specific impact of internal AI deployment on cost efficiency, and whether the Research business can accelerate its organic growth to match the 4-5% rate of its peers.

Answer

CEO Matthew Kissner stated that any potential impact from U.S. government funding actions is a 'low single-digit' issue due to significant geographic diversification and multiyear contracts. EVP Jay Flynn added that only a single-digit percentage of article output is tied to direct U.S. federal funding. Flynn also detailed that internal AI is being used for workflow automation and research integrity, contributing to overall margin improvement, though a specific basis point impact was not provided. Kissner addressed the growth question by explaining that Research revenue is back-loaded and growth rates are expected to be 'much more at industry levels' by the end of the fiscal year.

Sami Kassab of Exane BNP Paribas asked about the timing of IRIS² capacity revenues, whether the EU Commission would guarantee a minimum IRR, and the key technical and commercial differences between SES's mPOWER and Starlink.

Answer

CEO Adel Al-Saleh explained that IRIS² capacity revenue will begin post-launch around 2030, though development-milestone revenues will occur sooner. He noted that while not providing a specific IRR guarantee, the EU will be an anchor customer with guaranteed capacity uptake, and such concession contracts typically include IRR protection mechanisms. He differentiated SES's sophisticated, programmable mPOWER constellation, which offers committed information rates and managed services, from Starlink's standard, best-effort model, positioning SES to serve a market requiring more complex, high-value solutions.

Sami Kassab of BNP Paribas inquired about feedback from early adopters of CoCounsel regarding its reliability, referencing a recent Stanford University study, and asked if firms are expanding their initial pilot programs.

Answer

CEO Steve Hasker stated that customer feedback on CoCounsel has been very positive since its acquisition. He directly addressed the Stanford study, clarifying that it did not cover CoCounsel and that Thomson Reuters disagrees with its findings on Westlaw Precision, citing internal and customer testing that shows a 90% accuracy rate. Hasker confirmed that the process of firms broadening their pilot programs to more professionals is now starting.

Sami Kassab from Exane asked for details on the restructuring within the Tax & Accounting division, the reasons for the software sales decline in the Enterprise Legal Management (ELM) unit, and whether new legal analytics tools could help restore growth in the Legal & Regulatory division.

Answer

CFO Kevin Entricken explained that restructuring in Tax & Accounting is focused on improving editorial processes, applying lessons from the Legal & Regulatory group. CEO Nancy McKinstry addressed the ELM sales decline, attributing it to a customer shift from perpetual licenses to subscriptions and a tough prior-year comparable, while affirming the business will grow for the full year. She also expressed strong optimism for legal analytics, like the new M&A Clause Analytics tool, calling it the 'future of the industry' for driving productivity.

Sami Kassab from Exane inquired about the sustainability of strong free cash flow and working capital contributions, the 2017 restructuring charge guidance, and the seemingly underwhelming Return on Capital Employed (ROIC) guidance, especially concerning the performance of recent acquisitions.

Answer

CFO Kevin Entricken explained that 100% cash conversion isn't sustainable annually, guiding to ~95% moving forward, and confirmed the 2017 restructuring guidance of €15-€25 million is a more normalized level. CEO Nancy McKinstry added that recent software acquisitions are performing as expected for businesses not yet at scale, and they are confident these will meet financial criteria within 3-5 years as they leverage Wolters Kluwer's distribution.