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Earnings call: LTG focuses on AI and strategic M&A amid market challenges

EditorEmilio Ghigini
Published 2024-04-17, 05:36 a/m
© Reuters.

Learning Technologies Group plc (LTG), a leader in digital learning and talent management solutions, has reported a stable performance in the face of a tough macroeconomic environment for the full-year 2023. The company's revenue reached GBP562.3 million, a slight decrease of 2% on a constant currency basis, primarily due to a dip in transactional revenues.

Despite this, SaaS and long-term contracts have kept the business resilient. Adjusted EBIT mirrored the revenue patterns, standing at GBP98.5 million. A notable achievement for LTG was a record year in operational cash generation, allowing for a voluntary debt repayment of GBP25 million. Consequently, the company's net debt was reduced to GBP78.6 million.

Looking ahead, LTG is set to concentrate on organic growth and the development of AI-enabled products, with strategic mergers and acquisitions (M&A) also being a key focus for 2024. The company has proposed a final dividend of 1.21 pence per share, marking a 5% increase from the previous year, pending shareholder approval.

Key Takeaways

  • LTG's full-year revenue for 2023 was GBP562.3 million, a 2% decrease on a constant currency basis.
  • Adjusted EBIT for the year matched revenue performance at GBP98.5 million.
  • The company made significant strides in operational cash generation, leading to a voluntary debt repayment and a reduced net debt of GBP78.6 million.
  • A focus on organic growth and the integration of AI into products is a priority.
  • LTG plans to pursue strategic M&A in 2024, with a leverage ratio of 1.5x providing GBP110 million for acquisitions.
  • The company has proposed a final dividend increase of 5% to 1.21 pence per share.
  • LTG owns Rustici and has access to valuable data through Watershed, positioning them well in the AI learning space.

Company Outlook

  • LTG is committed to reinvesting in the business for organic growth.
  • Development of AI-enabled products is a significant part of the company's future strategy.
  • Strategic M&A is a priority for 2024, with a comfortable leverage ratio allowing for GBP110 million in acquisition funds.
  • The company aims to maintain a progressive dividend policy and is exploring share buybacks.

Bearish Highlights

  • Transactional revenues have declined, affecting overall revenue figures.
  • There is caution around the timing of increased discretionary spending by corporates.

Bullish Highlights

  • SaaS and long-term contracts have provided stability to the business.
  • The company has seen growth in regions such as Latin America and the Middle East.
  • LTG is well-positioned to address the skills gap with its AI-driven personalized learning content.


  • The impact of reduced tech spend has been felt on revenues.
  • Volume is down, although some clients are paying more, offsetting the decline.

Q&A Highlights

  • The company addressed the potential impact of AI on fringe businesses, noting no significant loss of customers to AI alternatives.
  • LTG discussed the balance sheet capacity for M&A and debt refinancing plans for 2025.
  • Inflation concerns were addressed, with the company having the ability to adjust prices within their content business.

In summary, Learning Technologies Group plc is navigating a challenging economic landscape with a clear focus on leveraging its strengths in SaaS and long-term contracts, while also aiming for growth through AI innovation and strategic acquisitions.

The company's proactive approach to debt management and shareholder value, as evidenced by the proposed dividend increase and share buyback considerations, reflects a confident outlook for the future. As LTG continues to evolve and adapt to market conditions, it remains a key player in the digital learning and talent management industry.

Full transcript - None (LTTHF) Q4 2023:

Unidentified Company Representative: Good morning, ladies and gentlemen, and welcome to the Learning Technologies Group plc Full Year Results Presentation. [Operator Instructions] Before we begin, we'd like to submit the following poll. And if you give that the kind attention, I'm sure the company would be [indiscernible] grateful. I'd now like to hand over to the management team from Learning Technologies Group plc, Jonathan, Kath. Good morning.

Jonathan Satchell: Thank you very much. Good morning, everyone. Well, it's nice to do this in-person, isn't it? We've been a bit slow in coming back to the doing in-person presentations post COVID, but it's very nice to see a few people in the room and do this in a hybrid way. So welcome to our first one for about full years. Firstly, I just want to talk about how proud I am of the business and the team in what has been a pretty challenging place. I don't know if you've noticed, but 2023, perhaps wasn't the best year for the corporate world and the macroeconomic background. But I think that we demonstrated a really solid, stable, resilient performance and well done to our people who achieved that. I'm particularly proud of those results following a notable decline in corporate sentiment in Q2. I stood or rather on a webinar stood a year ago almost to the day, and we're still feeling pretty confident about our outlook. And that became somewhat more negative and pessimistic in the ensuing weeks, it was ironic, we literally sort of came to a cliff edge in terms of corporate sentiment and activity shortly after that presentation. Amazingly, almost every large corporate customer and prospect engaged in sort of delayed spending review, which lengthen sales cycles, blah, blah, blah. What's really positive is that although that was good, it was mostly offset by resilience of our long-term services contracts. With those above $10 million and we had an unusual year where there are a lot of them, every single one of them was retained. And that gave us a great deal of reassurance and confidence about the future. I'm going to talk a little more about AI later on. So I'm not going to talk about the significant progress that we've made in that regard now. But you begin to get a sense of the scale of the business when you realize that LTG and we're just a medium-sized U.K. corporate with a lot of businesses around the world, delivered learning or was involved in the provision of learning to over 200 million people last year across the globe. I find that stat quite astonishing. In fact, we think we've underplayed that deliberately because we don't want to be overstating it, but some of the numbers indicate something quite a lot higher. Do bear in mind that we're involved in 75% of all digital learning content launches throughout the world. And indeed, of course, we build a lot of content for many of the world's largest corporates and governments. Something that you'll notice a little difference in tone. We became more active last year in our portfolio management. It was deliberate. It was intentional. I'll talk more about it a little while later, but culminated in the sales of Lorien and TTi direct staffing businesses, both of which we have judged to be completely noncore. We had acquired them with our GP Strategies (NYSE:GPX) acquisition turn a bit years ago. And you should look to expect more of this during 2024. Alongside those disposals, we also focused on further integrations, which I'll demonstrate later with the rationalization of our brands and our operating businesses. So something that those of you that know us well will recognize, we've always focused on delivering strong margins and turning that into cash. We are delighted with our performance in this regard and believe it's ultra-vital in this high interest rate and slightly more dangerous business environment. It's worth remembering, and it's easy to forget this, but in December 2021, a couple of months after we borrowed the money to buy GP Strategies, our net debt was GBP141 million, pretty big some money. Two years later, without any benefit from other proceeds from disposal or anything like that just normal operating cash flow with nearly half of that debt to GBP78 million. We care about this stuff, and we don't think that's a bad performance. In fact, we're proud of it. Of course, in January, almost immediate as we came into the year, we added the proceeds from the Lorien disposal not very much, but there's $20-odd million dollars. And so alongside continued strong cash flow hindering Q1, our net debt today is substantially lower than that, but capitals [indiscernible] in the numbers. So I won't tell you the number. Talking with Kath, let me hand over to, so she can give you more color on our financial performance.

Kath Kearney-Croft: Thank you, Jonathan, and good morning, everybody. The financials are presented on a continuing operations basis with the U.K. apprenticeship business under discontinued operations on a separate line on the P&L. For continuing operations, we saw a resilient performance for 2023 with revenue of GBP562.3 million on a constant currency basis, revenue was down 2%, reflecting the structure of our SaaS and long-term contracts, of which the latter were flat and the reduction in SaaS revenue was primarily due to the expected revenue reduction from the PeopleFluent churn. The challenging macroeconomic backdrop affected transaction and project related primarily in the Content & Services division. And the Software & Platforms division was impacted by the reduction in job postings in Breezy. Adjusted EBIT was GBP98.5 million, reflecting the same drivers as revenue and the impact of the temporary issues following the LEO integration with GP's content business to create GPLX. Adjusted EBIT margin for the group in H1 was 15.1%, improving significantly to 20% as GPLX issues were resolved resulting in FY '23 margins being 50 basis points up on 2022 at 17.5%. The continued commercial transformation program in GP in combination with rigorous cost control across the wider delivered substantial benefits in the second half, which are sustained into 2024. The group had a record year for operational cash generation and continue to delever, making a voluntary GBP25 million debt repayment in September 2023 with leverage ending the year at 0.7x on a covenant basis. The chart on the left-hand side reflects our reporting segments for Content & Services and Software & Platforms and the proportions remain the same. In the following slides, I'll cover the performance of the 2 divisions. The chart in the middle reflects our diversified footprint, and we continue to remain predominantly exposed to the U.S. market with slightly higher exposure to the U.K. and similar exposure to the Rest of the World, enabling us to deliver to global companies with localized delivery. Looking at the chart on the right-hand side, we see the split of our transactional SaaS, a transactional and SaaS and long-term contract revenues. With the challenging macroeconomic backdrop affecting the transactional revenues, we continue to see resilience in SaaS and long-term contracts moving to 73% of revenues, slightly higher than '22, giving us confidence in -- on the visibility and security of future revenues. In 2023, revenue decreased on a constant currency basis by 1% driven by the challenging macro affecting the volume of learning projects in GP Strategies. Strong performance in both Affirmity and PRELOADED partially mitigated the impact due to the subdued macro and we're pleased to confirm that's all clients with contracts above $10 million were renewed in 2023. Despite the challenges in 2023, GP Strategies profit has more than doubled since joining LTG, and the graph on the lower part of the slide shows the margin expansion achieved through the commercial transformation program and the hard work and diligence of the GP employees following the LTG methodologies. We can see in the latter part of the graph, the impact of the GPLX issues had on H1 performance and the start of improvement in Q3 with significant improvements in Q4 in conjunction with the normal strong quarter. Q4 margins are the strongest of all quarters, which drives the H2 rating in this business. Adjusted EBIT for Content & Services reflected the macro and GPLX integration challenges with a resilient performance for the full year despite this backdrop. In Software & Platforms, we continue to see a mixed business performance with revenues declining due to a combination of the higher churn expected in PeopleFluent, 11.8% from customers with less complex needs. Complex transactional -- sorry, lower transactional revenues in Breezy related to job postings and lower revenue reflected due to the softness in the technology sector, customers and the commencement of a strategy to migrate customers to a version of Reflektive within Bridge. In addition, we saw weaker demand in VectorVMS, due to reduced contract labor usage and lower health care rates and it was partially offset by continued strong growth in Rustici and good growth in Bridge. We continue to expect Breezy to be well placed to benefit from the pickup in the SME recruitment market once these returns. Adjusted EBIT benefited from operational leverage in Rustici and optimized central costs, including rightsizing the facilities footprint to match working practices. We're pleased to report record operating cash, both on adjusted and statutory measures. Adjusted operating cash flow increased GBP3.1 million with operating cash conversion improving to 88% compared to 82% in the prior year. The improvement reflects a lower working capital investment in 2022 using a circa GBP7 million lower bonus accrual due to non-performance against targets partially offset by lower share-based payments and higher R&D related capital expenditure as we've continued to build out our functionality, particularly in Bridge and Breezy and starting to develop AI-enabled products. These liabilities decreased as we continue to rationalize our footprint and earn-out payments related to Breezy and eCreators for their performance in FY 2022. And as we come towards the end of our earn-outs agreements, payments will be immaterial this year. We implemented a restructuring program in late 2023, which cost GBP2.5 million with an ongoing annual benefit of GBP9.5 million. And free cash flow for the year finished at GBP44.4 million, GBP5.9 million lower than the prior year, primarily due to net higher interest payments, including GBP4.5 million related to H2 2022 paid in January 2023. The graph at the top of this slide reflects the movement in net debt across the year. The noncash change in interest accrual reflects the change in accrued interest payable in the following year. Our loan facility is all U.S. dollar based. And the GBP/USD FX rate used to retranslate the balance sheet was 1.27 at the end of 2023 compared to 1.21 at the end of ’22 and there was a net benefit to debt of circa GBP6 million. The GBP41 million reduction of net debt to GBP78.6 million translated to a continued deleveraging through the year to 0.7x on a covenant basis at the end of 2023 compared to the 1.1x at the end of 2022. And taking into consideration, GBP15.5 million cash received from the sale of Lorien in January, the leverage ratio would be 0.6x. We continue to pay quarterly repayments of $9.6 million and in September, voluntarily repaid an additional $25 million. With the swift deleveraging and the balance sheet strength, we are taking the opportunity to reassess our capital allocation priorities. Our first priority is to reinvest in the business to drive organic growth. In 2022, we invested 2% of revenue in CapEx, primarily in the development of software products. And in 2023, we increased that to 2.5%. For 2024, we expect this to increase slightly as we put further investment into developing AI-enabled products. Strategic M&A is at the heart of LTG's philosophy, and we've had a temporary pause in 2022, which continued into 2023. The strength of our balance sheet gives the Board confidence to return to value-accretive acquisitions in 2024. Taking into consideration the ending net debt in addition to the receipt of the cash followers of Lorien, a leverage ratio of 1.5x would provide approximately GBP110 million for acquisitions that's align with our strategic objectives. Ensuring our debt levels remain at comfortable levels allows everybody to sleep easily at night. Paying down debt remains one of our capital allocation priorities as evidenced by the voluntary $25 million payment in September, alongside the regular quarterly payments. LTG has a progressive dividend policy with dividend covered recently in the circa 5x range. To ensure maximum flexibility for capital returns to shareholders, we will be including a resolution at this year's AGM to enable share buybacks should it become appropriate to do so. However, this is not an indication of intent at this time. The strength of the LTG balance sheet provides optionality, and we are conscious in ensuring we are making best use of the company's cash resources. Adjusted diluted EPS continuing operations has reduced due to a combination of marginally lower adjusted EBIT, significantly higher interest costs partly offset by a lower tax rate due to the recognition of its deferred tax assets related to U.S. tax losses. Whilst 2023 was challenging, the business proved resilient, thanks to its high levels of SaaS and long-term contracts. And this, combined with the record operating cash generation has given the board confidence to propose a final dividend of 1.21 pence. This reflects a 5% increase on the 2022 final dividend, subject to shareholder approval at the AGM and giving rise to a circa 4% increase in the full year dividend. Return on capital employed is in line with the prior year. As with prior announcements, we're including some technical guidance to help with modeling. For finance charges, we continue to have a term loan structure in place and interest is charged on the gross debt. With the benefit of cash on deposit under the interest-bearing accounts, we're forecasting a net circa interest rate of circa 5.5% based on what we know today, although noting interest rate forecasting is very difficult. Adjusted tax and FX guidance is in line with our prior guidance for 2023 and a reminder of the treatment of noncore assets is here. This year, the reported 2023 comparators will continue to include Lorien and the external staffing business of TTi Global contracts that we disposed of on the 2nd of January and October 2023, respectively. But we will share like-for-like comparisons to aid understanding. And with that, I'd like to hand back to Jonathan.

Jonathan Satchell: So we get lots of feedback about how complex the group appears and how -- and I hope today that we can improve on that for you so that you get a better view as a result of our efforts to rationalize our own operational benefit. But it's an interesting thing. We believe we integrate and rationalize our group well, but we're always criticized for being too complex. And actually, one of the other things we're going to do is moving forward. You won't see all of the different brand logos on this slide, we're giving you for the last time to show the rationalization, which I'll talk to it in a moment. But you'll now just see us report in 2 divisions: Content & Services, and Software & Platforms. You've known about those divisions many years. But remember, they made up of 17 acquisitions on top of the original business that created LTU which was epic. However, if you look here, there are only 3 businesses in Content & Services and 7 in Software & Platforms. I can assure you we haven't been careless and mislead the other 7 businesses. So what's happened? Well, we acquired something called Patheer, which was an early-stage acquisition for us to get into AI which provides skills matching capabilities, and that's now fully integrated into PeopleFluent and Bridge. Reflektive was bought because it's an exceptionally capable performance management tool that has now been built into Bridge as an enhanced performance management module and Bridge has moved from being a single product to a modular product, and that gives us obviously upselling opportunities. And then you've got Gomo and Instilled. Gomo is our homegrown authoring tool, Instilled was a video capability acquired with PeopleFluent and both of those are now fully integrated into the Bridge product, providing those capabilities. You're no doubt aware we've talked to it and Kath alluded to it of the challenging integration that we incurred with LEO when we merged into GP last year to form GPLX. But I want to be really clear, it was worth it for the benefits that we are now deriving from that combination, which created the world's largest learning experience development studio. And likewise, with PDT, which is now the foundation of GP's Diversity, Equity and Inclusion solutions. Finally, let's just talk about Open LMS for a moment. We always talk to it as a single business, but what it is actually is a combination of 3 acquisitions. We bought the global market leader, and then we acquired the number 2 and 3 to put alongside it. So I hope that gives you a better appreciation of the scale and extent of the integrations and rationalization that we've been undertaking, where appropriate, where acquisitions are bolt-on rather than strategic. We almost always integrate them with other businesses that we already own. So the business is perhaps not as complex as someone -- some people sometimes fear. Alongside that, cross-selling is slowly gaining traction. It's not the easy thing to do. We have the co-CEO of GP in the room actually because we have a very big European Learning Technology show this [indiscernible] was over there. If you want to chat to him later. He is one of the people who is ultimately responsible for cross-selling. And we are really focused on it. And 35 of GP's top 100 clients take some form of other LTG product or service, mostly, of course, a product because they have many other services and that's something to be proud of. Not all of those have occurred because of our relationship with GP, some of those we shared -- were shared clients beforehand, but even so it's a significant stat. So turning to AI, I said I'd talk to you a little more about that. And I'm going to apologies be a little controversial for a moment. I watch others presentations all the time, and I see people both you know the wonderful things they've done in terms of integrating with GenAI. Well, I think that's great, to be honest. And I don't just tell you, we've done it because we have to do it. And so yes, our tools now are using GenAI to develop some content, develop storyboards, to localize content, to develop images, to generate images that can be used within content, and laterally and still an early extent at the moment, we're using a very clever tool, which we're partnering with that can develop videos. So instead of doing a normal situation where we send the media team out to shoot the video, it's one of the most costly things and time we see the things to do. We're able to create those GenAI, generated videos that give the impression of 2 people having an interaction, difficult conversations something like that. And that can all be done now with technology, it is amazing. But that technology isn't ours, we're using others technology, and we're integrating it cleverly and effectively into our tool. And so I'd say to you so what? And that, for me, isn't the big differentiator. In fact, I call it table stakes. So sorry, if you think that sounds controversial or industry might think it sounds controversial, but frankly, it isn't. I think it's just candor. And we're doing that, tick the box, celebrate that we're in the same place as our competitors, but we're not ahead of them. So how can we get ahead of them? That's the thing that interests us most. And that's why we haven't come out at the beginning of last year when everyone was talking about AI and saying we're going to do this [indiscernible] all that. We've waited because we think there's a real opportunity with AI. And if you look at things, the thing that you can do with AI to best effect is to look at how you can take a careful and considered approach to this, and we've been aided by a handful of deep relationships with key clients who have tasked us with helping them implement AI learning in the most impactful way possible. That's been unbelievable for us. We've slipped into many dead ends. We've learned many things along the way, but all of that has informed us of how we can truly make AI make a difference to learning. The holy grail for me and for many professionals in this industry peers is over there. We've been in this industry for 3 to 4 decades is we always wanted to be in a situation where you can deliver something that's personalized and targeted. How many of you have done learning that you've got going to say, I know half of this stuff. And I have to go through an hours' worth an e-learning course just [indiscernible] learning 5 minutes that makes me compliant. How have you been able to actually deal with that? And so what we're trying to do is avoid that situation, but we need to know 3 things and they're hard to know, and this isn't just about getting your assessment. We need to know what you know today, what you don't know today, and that's not just a subtraction of what you know. It's actually a different question to answer. And most importantly, what does your employer or your business or just the industry demand of your skills tomorrow? So how -- what's your competency gap effectively, coming then to skills gap. And how do we get you there? If we know those 3 data points, we've done enough learning content over the past 4 decades that I promise you, we're not concerned about our ability to design appropriate content and chunk it up into appropriate nuggets that are properly tagged that we can deliver the right piece of content to your learning style at the right time. But we have to use AI to play to one of its greatest strengths, which is assimilating multiple data center sets and deriving meaningful insights from that data in a consistent and most importantly, repeatable way. Now that's what AI, does not GenAI, but just AI in general. And it does is in a way that we simply couldn't as humans do it. So we're enormously fortunate in owning the plumber of the industry. I've told you about the many times, it's also one of our very best acquisitions, Rustici. But if you think about what they do, they sit at the very heart of the launch of 75 -- in our estimation, 75% to 80% of all the content that's consumed across the world by corporates when they're training their people. So we see all of this content launched. We have and knowledge of the Meta (NASDAQ:META) tag wrapping around every piece of content. Some are good, some are not so good, but we have the knowledge. Now of course, that data has to be protected in particular ways. But we are already in the place where we are in the flow of that data, no one else is, not to the same extent. And that gives us a real advantage. Don't forget, we're also on Watershed which has spent years refining how to gather the alternative data for its customers to inform us of the competence of people and the impact learning is having on their businesses. So we're very excited by this. We're early stages. We have completed the conceptual design of this, and we're now entering the development phase in earnest. And I look forward to updating you about that later this year. I think the first prototypes and MVPs will probably emerge if we were lucky late this year, I'm going to tell you early next year to be precise. And I think it does 2 things. I think it one gives us the opportunity to provide a whole enhanced product sector Rustici and its customers. And we're not frightened the fact that we think we should make this available to the industry because we think it's absolutely essential for the future of the effectiveness of our industry and personalize learning. But also, it will give us distinct advantages in the way that we deliver those tools and capabilities into our customers, potentially using their technologies rather than the ones that we've developed because one thing we're finding with AI is it is quite transferable once you've got the AI engine to do the work it needs to do. Okay. So the other thing I'd say to you is it's a hard thing to do, which in a strange way, we feel is a rather distinct advantage to us, as we already have so much exposure to the various components required to be -- with that global breadth of understanding and ability across the group. So we're feeling pretty excited about that. We've talked about execution projects it's quite a lot. I suppose one pivots towards these when you're not just going, oh, we've grown by X percent and so on and so forth. But I think they're always important. And what we've done in the last couple of years is we knew we had a year of focused execution 2022 through the commercial transformation program of GP, which went to astonishingly well, and we had great cooperation and collaboration from our GP colleagues, which I am forever grateful for, and the results are plain to see. This next -- this coming year is also going to be an important focus on execution, but we absolutely recognize that we need to return to growth. But I am genuinely cautious on when corporate --corporates and governments are going to become more confident to effectively begin their discretionary spend again. So we found -- I think we've plumbed the depths, we fund where they're willing to spend at an absolute minimum level, and you've seen that in the resilience of our revenue. But we don't have the confidence in that market yet to show that corporates are spending that extra money that they normally do on developing their people. And of course, that will return, I think there's a tight correlation to when animal spirits and the general economy returns, but it's going to take some time. However, there are pockets of real hope for us. We've seen LatAm really grow for us in the last couple of years, particularly last year, and we see and expect that to continue this year. We also saw the Middle East grow for us very nicely last year, naturally, given the events of the last few months and particularly the weekend, I think I should note a -- I note a caution on whether we think Middle East will see any significant growth this year, but I hope it will. As far as our intent to meaningful inorganic growth, and we've signaled in a couple of ways, is the appointment of a new colleague, Asad Ali, who is a career M&A banker and has joined us as our Head of Corporate Development. And he's chosen to do that. Please take the opportunity as Asad just out hand up, if anyone would like to speak to him afterwards, please take an opportunity to ask him how he joined. I asked him and he said, were you going to buy some stuff, don't you? And I hope that's absolutely the case, and we're going to do that together. So I'm delighted to have someone on Board alongside me that has the experience to help us navigate what I think are going to be some interesting M&A waters over the next couple of years, and also the active portfolio management that we've signaled to you. Alongside that strengthening, we've also made some internal leadership moves, which are beginning to have an impact on our operational business. The leader of Rustici, obviously a business well reviewed by the outsiders and within our group, has also now become the leader of Watershed, those businesses, you might remember, were together at the very beginning, Watershed was actually born after Rustici and was the reason we bought Rustici in the first place, we invested in Watershed. We then separated them, I think, for the right reasons, but we've now chosen to bring them back together and Tammy is having a meaningful impact on that since took over last November. And alongside that, the leader of Rustici has gone to -- sorry, the lader of Watershed has gone to run -- open on that of course, and that's a business that we are watching with interest to see what we can achieve there. Naturally, GP's margin improvement journey is now going to slow down, okay? Nothing wrong with that. We've always believe GP will get to a 20% EBIT margin on an ongoing basis. We think it will be high teens, and we're beginning to approach that. And therefore, you will see a slowdown, but there will be some more modest increases this year and next. It's also worth mentioning that we're creating a subsidiary within GP, which is solely focused on U.S. government contracts. Whilst we don't anticipate this will benefit overall margins, which is an important development that will refine our foreign owner obligations and enable us to be more collaborative with the mainstream commercial GP business, whilst maintaining vigilant protection of the U.S. government's confidential information. We are respectful of all the restrictions that are on us as a foreign owner and we need to ensure that those work as appropriate as they can, whilst being absolutely maintained. And I believe that we're going to do that very effectively by hiring off the government contracts into a single subsidiary. You'll have noticed my more pronounced language around active portfolio management. This is intentional and it's come about for 2 reasons. One, our lack of desire for obvious reasons to raise equity at these levels and also a recognition, there's a tighter focus on pure learning and talent development is really important. You can't travel along this road that we have of 17 acquisitions over 10 years, and not collect some quality businesses that don't quite align with our pure mission of learning and talent development. Do bear in mind that with PeopleFluent and GP, we bought 2 similar businesses drives and that they were long-standing buy and build stories. So over time, you pick up -- their missions were slightly different. And indeed, GP Strategies had a develop mission at the very beginning of being an engineering training business. And we just sold very much nearly the last engineering business that sits within the GP portfolio. That was Lorien Engineering that we sold a couple of months ago. And that will result in substantial additional capital to support our acquisition plans as we continue with our active portfolio management and be assured, we won't waver from our absolute developed focus on profit and cash generation. So a few key messages. I'll leave you to review these yourself and I've spoken to each one of these or Kath has, but I want to convey my final point and that's to do with what our customers are telling us. And most importantly, rather than listening just to learning and development in HR people, which we have the delight of talking to all the time, we also get now to see just how much more important learning and talent development is to the C-suite. So late last year, CEOs were surveyed. And they -- the survey found that CEO's top internal focus was to continue to attract and retain talent. I suppose, nothing big surprising there. But they're willing to keep spending on that, up skilling that exist that talent over the coming years. That for me is really important. I think we've got past the point of needing to evangelize or argue about the concept that there's a real challenge to business now, and that is how do we know stuff? How do we make sure our workforce is competent for tomorrow? I think AI is sufficiently scaring C-suite to know that this business is going to change in shape, people are going to change the shape of what they do, and they need to be prepared for it with the right methodologies and infrastructure in place to be able to deliver learning swiftly and effectively. I really believe LTG is well positioned for this. These are complex challenging demands, but we have spent time in a considered way of building a wide breadth of capability. Sometimes that's found not be appealing in the market. This question of should we have services alongside software? We personally believe that it's the way our customers buy things and therefore, designing our company to meet that customer need is rather appropriate, and we will continue to pursue finding a way to deliver comprehensive solutions. And as we emerge from this quieter period in the economy and the markets, we think that there is a great opportunity, one, to return to organic growth, which, of course, we're focused on and want to. But we're also going to get back on that acquisition trial again. And after we made the huge leap by making the acquisition of GP Strategies, we're ready to make some furthermore -- equally meaningful, perhaps not in size, but certainly in strategic intent, meaningful leaps as we make further acquisitions going forward. So we're very much -- perhaps, it's been a challenging couple of years, but we're very much focused on our ability to see the business move very dramatically forward over the next couple of years. And I think AI play a big part in that. That concludes our presentation, and very happy to move to questions.

Unidentified Company Representative: [Operator Instructions]

Gareth Davies: Gareth Davies from Numis. A couple from me. The first one, you alluded to Breezy as being kind of -- a part of the reason for the minus 4 in Software & Platforms. Can you just talk a little bit about current trade in January through April? Are you seeing sequential stabilization as we start to hit easier comps and we back into growth yet? Maybe expand a little there?

Jonathan Satchell: Yes, very happy to. So Breezy, for everybody else's benefit is our small- and medium-sized business, American business recruitment platform is a very well will grow through our finance -- voted by CNN in their top 5 recruitment software platforms. So you post your job adverse on it or -- sorry, you process your job applicants on it, but you post your jobs adverse through it and it goes on to all the various job sites and so on around your market. And what we've seen is very interesting. So the business grew from $3 million of revenue to about $15 million across 2019 to '22, and then it literally in Q4 of '22 stopped, and we were thought it was a bit strange, it just slightly flat lining. And MRR has grown tepidly from there by about 5%. So perfectly stable, but not much growth, so the software platform is very solid. But what we saw was a complete decimation of the job posting spend, which was the transactional revenue, which used to run is about $400,000 a month and is now like $150,000. What we've seen -- and that's been relatively consistent through last year, I think we had a spike in 1-month, but it's been relatively flat and consistent. We are beginning to see the tentative signs of improvement, but we're talking tens of thousands of dollars. So I think we saw $180,000 in February or something like that. So we've not yet reached $200,000, but we are just seeing a very small pickup. And I'm not going to call it. It will just happen Gareth. We have no way of saying when it will, but we're there, it's an incredibly stable business. Customers are massively loyal. Software platform is actually fine stable, good monthly recurring revenue, transactional revenue is still very depressed.

Gareth Davies: The second one, cap [indiscernible] the GBP110 million of balance sheet capacity in terms of sort of M&A potential, you've obviously talked a lot in that presentation around portfolio management. And I think your word were substantial capital. Can you put any context on substantial? Are we talking kind of double the GBP110? Or are we...

Jonathan Satchell: Gareth, do you want ask last question. Look, we are -- we've said that we are sharpening our focus on learning and talent development. We are fortunate enough to have some very high-quality businesses in the group. We, frankly, have a slightly different opinion to the market about the collective value of those businesses, and perhaps some outsiders do as well. But I wouldn't want to be drawn on quantum.

Gareth Davies: And then final one, just that refi due 2025, 1.5x given your record of the year and feels quite cautious. I thought to would have been what you'd have been gunning at personally, but just in terms of that debt refi, what's the kind of timing and...

Kath Kearney-Croft: So we'll expect to do that starting in the springtime, probably rolling into the summer and capacity TPC. I think you're at 1.5x, we're talking about leverage on M&A. I think last year, we were told that expectations had come down. They now seem to have gone up slightly. So 1.5, I think, is where we have been guiding in terms of normality. In terms of our capacity and ability to deleverage, we wouldn't say anything was off the table, but we would want to be able to see that the cash generation would come through to be able to see level back to more normal levels quickly.

Unidentified Analyst: Richard's from [indiscernible]. A couple of questions. If you look at your revenues by end client sector, does that explain the flat revenues? I'm thinking that there's any number of companies in the agency sector, where 1/3 of our business is from technology clients who were spend is down 20%, 2/3 is from everywhere other than technology that's up double digit, and you do the math's on that, you get flat revenue. So I just wondered if you've done that sort of analysis to show the impact of reduced tax spend. And the second question is on the personalized AI. Is this a premium product that you can charge more for? Or is it more about being ahead of the industry and winning share? And as part of the AI analysis, have you identified some fringe businesses where AI is a threat that we need to be mindful?

Jonathan Satchell: Okay. You've done a standard analyst thing sort of asking several new questions. We don't remember the ones we gave -- in terms of sector spend, it's mixed. We have some specific analysis and then some anecdotal analysis. But of course, bear in mind, we don't group all of our spend across all our businesses and division and then look at it like that. But I can tell you that financial services companies are definitely down on spend. I might have [indiscernible] to add to this in a moment. We've seen relatively stable spend in the sort of countercyclical industries that you expect like government, for instance. Automotive has stood up astonishingly well. So we were really pleased with that. We had some unfortunate exposure more than we realized actually in our small Reflektive business, which had sold San Francisco start-up based and it is sold all its start-up makes its performance management system. And guess what? All of those stopped using it as they began to realize that no more money was arriving in funding, and they need to cut their costs. So we saw some pretty savage decline in that spend in Reflektive, but we've ended up buying that business incredibly well. You might remember, we paid a very small amount of money for it, and we've got some great technology. And we also have really good solid clients like Goldman Sachs (NYSE:GS) user globally. So we saw a bit of tech sector softness there. We've seen -- I think, whilst we've seen a little bit of tech sector softness in GP in the larger scale staff. And then it's just been -- it's been sporadic and spotty. You can't really describe it big German engineering business has slowed down on its spend and we're putting less people through certain learning programs at the moment than we did last year. But it's going to come back. It's not discernible. It's not easy to describe a particular trend in something that we can talk to. But I suppose my takeaway would be we're very exposed to automotive. We were concerned whether the macro might have a bigger effect, and it hasn't. I think they have so many challenges with new products launches and the general state and change and pace of change in the auto industry that learning is an absolute requirement. On the AI matter, so interesting, we are more focused, and you might consider this rather than appropriate, I don't know, but we're more focused on developing a great solution than we are yet on the commercial imperatives for it, one because we think which all will have to. And secondly, because I think the commercial will sort itself out, especially given Rustici's unbelievable market dynamic and penetration. So of course, there will be a price for this product. Rustici is already a premium price product, and this will just be a very major enhancement to its capabilities. So we haven't thought about the commerciality, but yes -- but we're -- I suppose we're not thinking about it in that way because we're not concerning, we don't see what it does first. And to the similar point when we have that capability that we can then pull across into other parts of the group, and that's the great strength of the group, the transferability. We think that we will be more focused on the way we target that capability. It may well come with -- within our managed learning solutions from GP, for instance. And that may just be about providing this as an additional lock-in capability. So we want to be open-minded about how we do it.

Unidentified Analyst: And the fringe businesses, there might be...

Jonathan Satchell: Are you talking about our fringe businesses? Well, look, I think I speak to the point earlier, the big concern that we had we got some Goldman colleagues in the room. Goldman has published a note that included us last year, suggesting that we might be vulnerable to this -- that the threat of GenAI. We counted that by saying, look, it's not the panacea yet. It might be eventually. But I'm rather -- should I say, I'm rather not enjoying, but I'd rather relieve and reassured by us following a relatively normal technology hype cycle curve, okay? And we are definitely in that point at the moment where the early adopters have gone, "Oh, this is great. We've made a big fanfare about it, but it's not quite doing everything we thought it would." Look, it's very clever and of course, it learns and becomes better quickly. So we need to always be respectful and acknowledge that. But we are not seeing sways of customers, all of a sudden saying, we don't need an agency like you with expertise to create our learning content anymore because we're doing it all ourselves. What we are seeing is that our fees can become lower and more efficient for our customers and our costs come down because we can get certain things done very well by GenAI. And as I said earlier, and I do reemphasize this, we are not making you suppose do that, we're different and clever than anyone else. We all should remember that we're all accessing someone else's GenAI capability and accessing it is not complicated or hard. It's going to be how you implement it and how you consider that human AI interface and how it works in best combination that will be the differentiation eventually.

Unidentified Analyst: It's James [indiscernible] from Goldman Sachs. I have 2 questions, please. I think, firstly, given the focus on returning to acquisitions in 2024, could you give an update on what are some of the key criteria when assessing potential targets? And just secondly, on GP Strategies margin, the exit run rate last year was around 17%. However, given that Q4 is a seasonally stronger quarter for the business, how should we think about the cadence of margin improvement for the year?

Jonathan Satchell: I'll give you too much information, I'd be slightly more positive, so Kath will take that one in a moment [indiscernible] do that now and we'll come back to that.

Kath Kearney-Croft: Yes. So you're right. Q4 is the strongest quarter and we've often talked about Q1 being a weaker quarter, particularly with the exposure to Asia. If you look at the Content & Services H2 margin, which is about just over 15% and gauge from there. We expect full year to be a little bit more, but we would expect to have an H2 rating still.

Jonathan Satchell: [Indiscernible] to give you all the answer to that number at all. It's going to be better than last year. So we -- we've signaled -- there's some consistency here, James. We -- we said when we bought GP Strategies that we knew that we had lurched dramatically towards services revenue. I don't think we did a great job about getting the message across the -- 3/4 of that revenue was long-term contract, so it wasn't transactional. It wasn't vulnerable. It was resilient. And I hope that you look at these results now 2 years on and see that and what is a testing time, so we can finally put the -- oh, my goodness LTG become a projects business in the rear view mirror because we haven't. We've got part of projects, and they were down last year, but look at how resilient we were, and that was all because of those fabulous long-term and contracts and deep customer relationships. But even so, its services revenue, and we have always geared ourselves to being -- Learning Technologies Group with clues in the name. We are very focused on delivering a mix lens of learning delivery and technologies and support it and technologies at the delivery end as well. We've got a lot of those. I think that you'll see us focus on a couple of different things. One, upgrading certain things so either adding to or literally swapping out and upgrading. And also, we're keeping a very strong eye on the market in terms of IP. We think that there's going to be a really interesting dynamic that goes on over the coming years with the way large language models will need to commercially deal with the IP that they need to stay alive and deliver the generative AI output that they need to. And so I think IP libraries, which are not in trend at the moment may well come back into trend, but for a different reason. We're also focused on the new technologies. I think we've waited for a long time. I happen to also have been a nonexec director of an augmented reality company -- augmented reality marketing company, where I've learned loads and had more full storms and you can imagine over the last 6 or 7 years. I still believe that technology will come to the fore eventually. I don't know whether any of you have seen Vision Pro, but it's [ Jollywell ] too heavy for you ahead. And it's a good start and it's way better than Google (NASDAQ:GOOGL) Glass. It's not there yet. Are we 2, 3 years away from something technology -- some hardware that's going to go, "Wow, this now works." If you sun -- your Ray-Ban sunglasses with AI cameras in them, and all the rest of it, then I think eventually, we are going to be in a situation where AI becomes a much more mainstream reality. It will be unbelievably powerful for learning. So we're tentatively watching all of those things. We're not about to buy an AI hardware company, by the way. But we're tentatively watching those sorts of situations. I'm not ruling out buying a services company. It would have to be territorial or very specialized in what it does. We are really excited about some territories that we can grow into, and we're impatient and maybe we'll buy into the territory rather than just grow organically. But our emphasis is more looking at Software & Platforms.

Unidentified Company Representative: Any other questions from the room? Claire, maybe if I could hand over to you for any online questions perhaps that we have for many investors, and then I'll pick up again.

Claire Walsh: Yes, certainly. Following up on the last question, we have a question from Kai [ K ] at Canaccord. What will be the focus areas for potential M&A, software or services?

Jonathan Satchell: I think I've answered that. Yes, I mean, the emphasis is the tilt is more towards software, Software & Platforms and clever infills, bolt-ons or something strategic. So I'm broad, okay? And it's one of the reasons why we strengthened our ability with the appointment Asad, because it's something that requires constant focus, and what it got from me was and from peers, who are obviously much more involved in the operational day-to-day was sporadic focus.

Claire Walsh: Yes, there is a question from Alasdair at Panmure Gordon. Given the inflationary backdrop, please give us a sense of price versus volume in Content & Services?

Jonathan Satchell: Interesting question, one asked. So we are -- we do have some more swift ability to adjust prices in our content business because naturally, it's project-based. Average project length is 6 to 9-ish months. So we go out to market with what we think are relevant prices. We haven't seen a ridiculous inflationary environment in terms of our cost inputs. Clearly, our main cost input is labor. We hire -- we have staff in-house employees for an enormous amount of that labor, many of them offshore, and we do hire some freelances for particular needs. The freelance rates have gone up. Our in-house labor rates have gone up, but not to a point that's causing us a massive issue with margins. So we've made some modest price increases, but we haven't been sort of exerting pricing power. I don't think we really would have it because it's a very competitive market, where we're putting 10%, 20% on our prices, where we're making much more modest increases. There's a reasonable balance between -- volume is down. There's no question. And there's a small offset by some customers paying us a little bit more for what we do, but it's not significant.

Unidentified Company Representative: Jonathan and Kath, thank you very much indeed for update investors. I know investor feedback will be particularly important to you both. I'll shortly redirect those online to give you their thoughts and expectations, but perhaps Jonathan, just a couple of closing comments just to wrap up with, and then I'll ask investors to give you, their feedback.

Jonathan Satchell: Sure. So thank you, everyone, for coming and seeing us, by the way, this time new office. We've moved from around the corner, and this is where we're based now. So thank you for joining us this morning. Thank you to everyone online. And let's see where this rather interesting journey goes over the coming months. There were many things to be excited about.

Unidentified Company Representative: That's great. Jonathan, Kath, thank you once again for updating investors. So please ask investors not to close the session, we now automatically redirect you with the opportunity to provide your feedback in order that management can better understand your views and expectations. So it will take a few minutes to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Learning Technologies Group plc, we'd like to thank you for attending today's presentation. Good morning to you all.

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