Wolters Kluwer 2024 Half-Year Report

Wolters Kluwer 2024 Half-Year Report

Alphen aan den Rijn, July 31, 2024 – Wolters Kluwer, a global leader in professional information, software solutions and services, today releases its half-year 2024 results.

Highlights

Group-level guidance for 2024 reiterated.
Revenues €2,891 million, up 6% in constant currencies and up 6% organically.
- Recurring revenues (82% of total revenues) grew 7% organically.
- Expert solutions (59% of total revenues) grew 8% organically.
- Cloud software (18% of total revenues) grew 16% organically.
Adjusted operating profit €765 million, up 8% in constant currencies.
- Adjusted operating profit margin up 40 basis points to 26.5%.
Diluted adjusted EPS €2.36, up 9% overall and up 11% in constant currencies.
Adjusted free cash flow €445 million, down 10% in constant currencies.
- Lower cash conversion partly reflects timing of large vendor payments.
Net-debt-to-EBITDA of 1.6x; Return on invested capital (ROIC) improved to 17.5%.
Interim dividend €0.83 per share, set at 40% of prior year total dividend.
On track to complete 2024 share buyback of €1 billion.
Wolters Kluwer Tax & Accounting to acquire European software solutions for €325 million.

Interim Report of the Executive Board

Nancy McKinstry, CEO and Chair of the Executive Board, commented: “We sustained organic growth of 6% in the first six months and improved our adjusted operating profit margin while increasing product investment. Several of our largest solutions have introduced enhancements that harness the power of generative AI to bring greater value and efficiency to customers. We also invested in rolling out solutions that support customers with new regulations, such as the U.S. Corporate Transparency Act and the E.U. Corporate Sustainability Reporting Directive. I am pleased to report that we are on track to meet our 2024 guidance.”

Key Figures – Six months ended June 30
€ million (unless otherwise stated)	2024	2023	∆	∆ CC	∆ OG
Business performance – benchmark figures
Revenues	2,891	2,725	+6%	+6%	+6%
Adjusted operating profit	765	711	+8%	+8%	+7%
Adjusted operating profit margin	26.5%	26.1%
Adjusted net profit	566	537	+5%	+7%
Diluted adjusted EPS (€)	2.36	2.17	+9%	+11%
Adjusted free cash flow	445	495	-10%	-10%
Net debt	2,932	2,466	+19%
ROIC	17.5%	15.4%
IFRS reported results
Revenues	2,891	2,725	+6%
Operating profit	690	632	+9%
Profit for the period	509	479	+6%
Diluted EPS (€)	2.12	1.93	+10%
Net cash from operating activities	622	681	-9%
∆: % Change; ∆ CC: % Change in constant currencies (€/$ 1.08); ∆ OG: % Organic growth. Benchmark figures are performance measures used by management. ROIC is based on twelve-months rolling figures. See Note 3 for a reconciliation from IFRS to benchmark figures.

Full-Year 2024 Outlook

Our group-level guidance for 2024 is unchanged. See table below. We expect sustained good organic growth in 2024, in line with the prior year, and a further increase in the adjusted operating profit margin.

Full-Year 2024 Outlook
Performance indicators	2024 Guidance	2023 Actual
Adjusted operating profit margin*	26.4%-26.8%	26.4%
Adjusted free cash flow**	€1,150-1,200 million	€1,164 million
ROIC*	17%-18%	16.8%
Diluted adjusted EPS growth**	Mid- to high single-digit	12%
Guidance for adjusted operating profit margin and ROIC is in reporting currency and assumes an average EUR/USD rate in 2024 of €/$1.08. *Guidance for adjusted free cash flow and diluted adjusted EPS is in constant currencies (€/$ 1.08). Guidance reflects share repurchases of €1 billion in 2024.

In 2023, Wolters Kluwer generated over 60% of its revenues and adjusted operating profit in North America. As a rule of thumb, based on our 2023 currency profile, each 1 U.S. cent move in the average €/$ exchange rate for the year causes an opposite change of approximately 3 euro cents in diluted adjusted EPS¹.

We include restructuring costs in adjusted operating profit. We expect restructuring costs to be in the range of €10-15 million (FY 2023: €15 million). We now expect adjusted net financing costs² in constant currencies to be approximately €55 million (previous guidance €60 million). We continue to expect the full-year benchmark tax rate on adjusted pre-tax profits to be in the range of 23.0%-24.0% (FY 2023: 22.9%).

Capital expenditures are expected to be near the upper end of our guidance range of 5.0%-6.0% of total revenues (FY 2023: 5.8%). We continue to expect the full-year cash conversion ratio to be around 95% (FY 2023: 100%) due to lower net working capital inflows.

Our guidance assumes no additional significant change to the scope of operations. We may make further acquisitions or disposals which can be dilutive to margins, earnings, and ROIC in the near term.

2024 outlook by division

Our guidance for full-year 2024 organic revenue growth by division is summarized below. We now expect the increase in group adjusted profit margin to be driven by our Finance & Corporate Compliance, Legal & Regulatory, and Corporate Performance & ESG divisions.

Health: we continue to expect full-year 2024 organic growth to be in line with prior year (FY 2023: 6%). The division margin is now expected to be stable due to one-time write-offs to streamline the portfolio.

Tax & Accounting: we continue to expect full-year 2024 organic growth to be slightly below prior year (FY 2023: 8%) due to slower growth in non-recurring revenues and the absence of one-time favorable events in Europe. The division margin is expected to decline slightly due to increased product investment.

Financial & Corporate Compliance: we now expect full-year 2024 organic growth to be higher than prior year (FY 2023: 2%) as transactional revenue trends continue to stabilize.

Legal & Regulatory: we continue to expect full-year 2024 organic growth to be in line with prior year (FY 2023: 4%).

Corporate Performance & ESG: we now expect full-year 2024 organic growth to be in line with or slightly higher than in the prior year (FY 2023: 9%) as Finance, Risk & Reporting revenues stabilize.

Progress against 2022-2024 strategy

In the first half of 2024, we continued to execute on the three priorities of our current strategic plan:

Accelerate Expert Solutions: we are focusing our investments on cloud-based expert solutions while continuing to transform selected digital information products into expert solutions. We are investing to enrich the customer experience of our products by leveraging advanced data analytics and artificial intelligence.
Expand Our Reach: we are seeking to extend into high-growth adjacencies along our customer workflows and to adapt our existing products for new customer segments. We are working to develop partnerships and ecosystems for our key software platforms.
Evolve Core Capabilities: we are enhancing our central functions to drive excellence and scale economies, mainly in sales and marketing (go-to-market) and in technology. We plan to advance our sustainability and ESG performance and capabilities and to continue investing in diverse and engaged talent to support innovation and growth.

A more detailed discussion of our strategy and business model can be found in our 2023 annual report.

Expert solutions, which include our software products and certain advanced information solutions, reached 59% of total revenues in the first half (HY 2023: 58%) and grew 8% organically (HY 2023: 7%). We made progress on further enhancing our expert solutions with artificial intelligence including generative AI (GenAI). As of July 2024, all five divisions have solutions in market that leverage GenAI, with more in the pipeline.

We expanded our market reach in several areas through organic development: in Health, we expanded our entry into the nursing test preparation market with Lippincott Ready for NCLEX³ and we launched a solution to help healthcare providers streamline the risk adjustment process with Health Language Coder Workbench. In Finance & Corporate Compliance, we introduced an innovative BOI⁴ platform to support customers with the U.S. Corporate Transparency Act (CTA). In Legal & Regulatory, we launched LegalCollaborator, a module that integrates with ELM’s Passport and TyMetrix 360 to enable an efficient and transparent process for law firm comparison and selection. And, in Corporate Performance & ESG, we extended further into the corporate ESG reporting market by adding scope 3 carbon emissions reporting capabilities to the CCH Tagetik ESG & Sustainability module.

Finally, having brought together core capabilities in product development, finance, digital marketing, branding, and communications over the course of the past two years, we are now focused on driving scale economies and operational excellence in these centralized functions.

Financial policy, capital allocation, net debt, and liquidity

Wolters Kluwer uses its free cash flow to invest in the business organically and through acquisitions, to maintain optimal leverage, and to provide returns to shareholders. We regularly assess our financial position and evaluate the appropriate level of debt in view of our expectations for cash flow, investment plans, interest rates, and capital market conditions. While we may temporarily deviate from our leverage target, we continue to believe that, in the longer run, a net-debt-to-EBITDA ratio of around 2.5x remains appropriate for our business given the high proportion of recurring revenues and resilient cash flows.

Dividend policy and interim dividend 2024

Wolters Kluwer remains committed to a progressive dividend policy, under which we aim to increase the dividend per share in euros each year, independent of currency fluctuations. The payout ratio⁵ can therefore vary from year to year. Proposed annual increases in the dividend per share consider our ﬁnancial performance, market conditions, and our need for ﬁnancial ﬂexibility. The policy takes into account the characteristics of our business, our expectations for future cash ﬂows, and our plans for organic investment in innovation and productivity, or for acquisitions. We balance these factors with the objective of maintaining a strong balance sheet.

Shareholders can choose to reinvest both interim and ﬁnal dividends by purchasing additional Wolters Kluwer shares through the Dividend Reinvestment Plan (DRIP) administered by ABN AMRO Bank N.V.

Progress on 2024 share buyback

As a matter of policy since 2012, Wolters Kluwer will offset the dilution caused by our annual incentive share issuance with share repurchases (Anti-Dilution Policy). In addition, from time to time when appropriate, we return capital to shareholders through share buyback programs. Shares repurchased by the company are added to and held as treasury shares and are either cancelled or utilized to meet future obligations arising from share-based incentive plans.

On February 21, 2024, we announced our intention to repurchase shares for up to €1 billion during 2024. So far this year, up to and including July 30, 2024, we have repurchased €603 million in shares (4,150,509 shares at an average price of €145.28).

For the remainder of this year, up to and including December 27, 2024, we have in place third-party mandates to execute approximately €397 million in share buybacks on our behalf, within the limits of relevant laws and regulations (in particular Regulation (EU) 596/2014) and the company’s Articles of Association. The maximum number of shares which may be repurchased will not exceed the authorization granted by the Annual General Meeting of Shareholders.

Assuming global economic conditions do not deteriorate substantially, we believe this level of share buybacks leaves us with ample headroom to support our dividend plans, to sustain organic investment, and to make selective acquisitions. The share repurchase program may be suspended, discontinued, or modified at any time.

Share cancellation 2024

At the 2024 Annual General Meeting on May 8, 2024, shareholders approved a resolution to cancel for capital reduction purposes any or all ordinary shares held in treasury or to be acquired by the company, up to a maximum of 10% of issued share capital. As of July 30, 2024, Wolters Kluwer held 11.6 million shares in treasury (equivalent to approximately 4.7% of issued share capital). As authorized by shareholders, the Executive Board has determined the number of ordinary shares to be cancelled this year is 10.0 million. Wolters Kluwer intends to cancel these shares in the second half of 2024. The remaining treasury shares will be retained to meet future obligations under share-based incentive plans.

Net debt, leverage, credit facility, and liquidity position

Net debt on June 30, 2024, was €2,932 million, up from €2,612 million on December 31, 2023, mainly due to dividends paid and the share buyback. The net-debt-to-EBITDA ratio increased to 1.6x at the end of June 2024 (YE 2023: 1.5x). Gross debt includes the new €600 million Eurobond (5-year term; 3.250% annual coupon) issued on March 18, 2024.

As of June 30, 2024, our €600 million multi-currency revolving credit facility remained fully undrawn. In July 2024, we signed a new €600 million 5-year multi-currency revolving credit facility, replacing the existing facility which was due to expire in July 2025. The new facility matures in 2029 and includes two one-year extension options.

As of June 30, 2024, net cash available was €808 million⁶.

Half-Year 2024 Results

Benchmark figures

Group revenues were €2,891 million, up 6% overall and up 6% in constant currencies. The effect of currency and the net effect of divestments and acquisitions were minimal in the first half of 2024 such that organic revenue growth was also 6% (HY 2023: 6%).

Revenues from North America accounted for 65% of total group revenues and grew 6% organically (HY 2023: 5%). Revenues from Europe, 27% of total revenues, also grew 6% organically (HY 2023: 7%). Revenues from Asia Pacific and Rest of World, 8% of total revenues, grew 10% organically (HY 2023: 6%).

Adjusted operating profit was €765 million (HY 2023: €711 million), up 8% in constant currencies. The adjusted operating profit margin increased by 40 basis points to 26.5% (HY 2023: 26.1%). Restructuring expenses, which are included in adjusted operating profit, were €3 million (HY 2023: €2 million). Product development spending (including capitalized spend) increased 5% in constant currencies, remaining at 11% of revenues in the first half (HY 2023: 11%).

Adjusted net financing costs increased to €25 million (HY 2023: €10 million), reflecting higher debt and a higher average effective cost of debt. Included in adjusted net financing costs was a €6 million net foreign exchange loss (HY 2023: €5 million net foreign exchange gain) mainly due to the translation of intercompany balances.

Adjusted profit before tax was €741 million (HY 2023: €701 million), up 6% overall and up 7% in constant currencies. The benchmark effective tax rate on adjusted profit before tax increased to 23.6% (HY 2023: 23.3%), due to increased limitations on deduction of finance cost in the Netherlands and the application of the Global Minimum Tax (Pillar Two) regulation.

Adjusted net profit was €566 million (HY 2023: €537 million), an increase of 7% in constant currencies.

Diluted adjusted EPS was €2.36 (HY 2023: €2.17), up 11% in constant currencies, reflecting the increase in adjusted net profit and a 3% reduction in the diluted weighted average number of shares outstanding to 240.1 million (HY 2023: 248.0 million).

IFRS reported figures

Reported operating profit increased 9% to €690 million (HY 2023: €632 million), reflecting the increase in adjusted operating profit combined with lower amortization and impairments of acquired intangible assets and other non-benchmark costs.

Reported financing results amounted to a net cost of €26 million (HY 2023: €11 million cost) reflecting higher debt and a higher average effective cost of debt. The reported effective tax rate increased to 23.4% (HY 2023: 22.8%) due to increased limitations on deduction of finance cost in the Netherlands and the application of the Global Minimum Tax (Pillar Two) tax regulation.

As a result, net profit for the period increased 6% to €509 million (HY 2023: €479 million). Diluted EPS increased 10% to €2.12 (HY 2023: €1.93), benefitting from the reduction in weighted average number of shares outstanding.

Cash flow

Adjusted operating cash flow was €624 million (HY 2023: €673 million), down 7% overall and down 7% in constant currencies, broadly as expected and partly reflecting the timing of large vendor payments. The cash conversion ratio declined to 82% (HY 2023: 95%) due to working capital outflows of €117 million compared to a small inflow in the comparable period (HY 2023: €11 million inflow). Capital expenditures declined 6% to €147 million (5.1% of revenues) mainly due to the phasing of development projects. Cash payments related to leases, including lease interest paid, reduced to €35 million (HY 2023: €38 million). Depreciation of physical assets, amortization and impairment of internally developed software, and depreciation of right-of-use assets totaled €158 million (HY 2023: €146 million).

Net interest paid, excluding lease interest paid, increased to €23 million (HY 2023: €18 million), reflecting the higher coupon on the Eurobond issued in April 2023. Income tax paid decreased to €171 million (HY 2023: €176 million), reflecting timing of refunds and prepayments. The net cash outflow related to restructuring was €2 million (HY 2023: net outflow of €3 million). As a result, adjusted free cash flow was €445 million (HY 2023: €495 million), down 10% in constant currencies.

Total acquisition spending, net of cash acquired and including transaction costs, was €2 million (HY 2023: €56 million) relating to deferred payments on acquisitions made in prior years. Dividends paid amounted to €276 million (HY 2023: €247 million). Cash deployed towards share repurchases in the first six months amounted to €516 million (HY 2023: €426 million).

Sustainability and ESG developments

With regard to our own workforce, our primary focus in the first half of 2024 was to continue attracting and retaining top talent in what remain competitive markets, especially for technology skills. Our human resources programs currently emphasize career development and manager enablement as well as fostering a supportive and engaging work environment. In the first half, our workforce turnover rate was stable at 10% (HY 2023: 10%; FY 2023: 10%) with voluntary turnover at 7%.

We remain focused on delivering on our SBTi-validated emissions-reduction targets, which commit us to reduce absolute scope 1 and 2 greenhouse gas (GHG) emissions by 50% and absolute scope 3 GHG emissions by 30% by the year 2030 from a 2019 base year. Business travel activity increased in the first half, in part due to a year-on-year increase in FTEs. However, we made progress on reducing our real estate footprint (and related scope 1 and 2 emissions) achieving a 4% underlying reduction in office space (m²) compared to year-end 2023.

Our sustainability efforts were recognized with a further improvement in our ESG risk rating from Morningstar Sustainalytics to 13.2 (from 14.4) bolstering our position in the top 5% of companies in the Software & Services sector globally.

We continued work to align our sustainability reporting with the standards set by the EU Corporate Sustainability Reporting Directive (CSRD).

The full results are available in PDF format below

About Wolters Kluwer

Wolters Kluwer (EURONEXT: WKL) is a global leader in information, software solutions and services for professionals in healthcare; tax and accounting; financial and corporate compliance; legal and regulatory; corporate performance and ESG. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with technology and services.

Wolters Kluwer reported 2023 annual revenues of €5.6 billion. The group serves customers in over 180 countries, maintains operations in over 40 countries, and employs approximately 21,400 people worldwide. The company is headquartered in Alphen aan den Rijn, the Netherlands.

Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX, Euro Stoxx 50, and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt (ADR) program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

For more information, visit www.wolterskluwer.com, follow us on LinkedIn, Facebook, YouTube and Instagram

Financial Calendar
August 27, 2024	Ex-dividend date: 2024 interim dividend
August 28, 2024	Record date: 2024 interim dividend
September 19, 2024	Payment date: 2024 interim dividend
September 26, 2024	Payment date: 2024 interim dividend ADRs
October 30, 2024	Nine-Month 2024 Trading Update
February 26, 2025	Full-Year 2024 Results
March 12, 2025	Publication of 2024 Annual Report

Media	Investors/Analysts
Dave Guarino	Meg Geldens
Communications	Investor Relations
t + 1-646 954 8215	t + 31 (0)172-641-407
press@wolterskluwer.com	ir@wolterskluwer.com

Forward-looking Statements and Other Important Legal Information
This report contains forward-looking statements. These statements may be identified by words such as “expect”, “should”, “could”, “shall” and similar expressions. Wolters Kluwer cautions that such forward-looking statements are qualified by certain risks and uncertainties that could cause actual results and events to differ materially from what is contemplated by the forward-looking statements. Factors which could cause actual results to differ from these forward-looking statements may include, without limitation, general economic conditions; conditions in the markets in which Wolters Kluwer is engaged; conditions created by global pandemics, such as COVID-19; behavior of customers, suppliers, and competitors; technological developments; the implementation and execution of new ICT systems or outsourcing; and legal, tax, and regulatory rules affecting Wolters Kluwer’s businesses, as well as risks related to mergers, acquisitions, and divestments. In addition, financial risks such as currency movements, interest rate fluctuations, liquidity, and credit risks could influence future results. The foregoing list of factors should not be construed as exhaustive. Wolters Kluwer disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Elements of this press release contain or may contain inside information about Wolters Kluwer within the meaning of Article 7(1) of the Market Abuse Regulation (596/2014/EU). Trademarks referenced are owned by Wolters Kluwer N.V. and its subsidiaries and may be registered in various countries.

¹ This rule of thumb excludes the impact of exchange rate movements on intercompany balances, which is accounted for in adjusted net financing costs in reported currencies and determined based on period-end spot rates and balances.
² Adjusted net financing costs include lease interest charges. Guidance for adjusted net financing costs in constant currencies excludes the impact of exchange rate movements on currency hedging and intercompany balances.
³ NCLEX = National Council Licensure Examination for the licensing of nurses in the United States, Canada, and Australia.
⁴ BOI = Beneficial Ownership Information required to be reported under the U.S. Corporate Transparency Act.
⁵ Dividend payout ratio: dividend per share divided by adjusted earnings per share.
⁶ Total cash and cash equivalents of €845 million less overdrafts used for cash management purposes of €37 million.

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