Wolters Kluwer First-Quarter 2024 Trading Update

Financial & Corporate Compliance revenues grew 4% in constant currencies and 4% organically (pro forma 1Q 2023: 2%). Recurring revenues increased 6% organically (pro forma 1Q 2023: 5%). Transactional and other non-recurring revenues began to stabilize (1% organic increase in 1Q 2024 compared to pro forma decline of 4% in 1Q 2023) but remain difficult to predict. Legal Services grew 4% organically (pro forma 1Q 2023: 2%), supported by sustained organic growth in service subscriptions alongside stable transactional revenues. Financial Services revenues grew 3% organically (pro forma 1Q 2023: 1%), supported by 4% organic growth in recurring revenues and a slight upturn in transactional revenues compared to decline a year ago.

Legal & Regulatory revenues grew 8% in constant currencies and 5% organically (pro forma 1Q 2023: 4%), reflecting the transfer into the division of the Bold legal research solution from the Tax & Accounting division. Legal & Regulatory Information Solutions grew 4% organically (1Q 2023: 4%), with sustained growth in digital products more than offsetting decline in print. Legal & Regulatory Software revenues grew 6% organically (pro forma 1Q 2023: 5%), buoyed by sustained double-digit growth in volume-driven transactional revenues at ELM Solutions related to the on-boarding of new customers.

Corporate Performance & ESG revenues grew 7% in constant currencies and 7% organically (pro forma 1Q 2023: 10%). Recurring revenues sustained double-digit organic growth, while non-recurring revenues declined in the quarter. Our EHS/ORM¹ unit (Enablon) delivered 8% organic growth (1Q 2023: 22%), driven by double-digit growth in recurring cloud subscriptions partly offset by decline in non-recurring software license fees against a challenging comparable. The CCH Tagetik Corporate Performance Management (CPM) platform delivered 13% organic growth (1Q 2023: 16%), driven by Europe and Asia Pacific & ROW. Our corporate tax, internal audit (TeamMate), and Finance, Risk & Reporting (OneSumX) units all recorded low single-digit organic growth in the quarter.

Cash flow and net debt

First quarter cash conversion declined compared to first quarter 2023, as expected, due to a working capital outflow in the quarter compared to an inflow in first quarter 2023. Adjusted free cash flow increased in constant currencies, mainly due to favorable timing of financing cost and tax paid in the quarter. A total of €252 million in cash was deployed towards share repurchases during the quarter. Net acquisition spending was negligible.

Net debt was €2,499 million as of March 31, 2024, compared to €2,612 million at December 31, 2023. Net-debt-to-EBITDA, based on rolling twelve-months EBITDA, was 1.4x at the end of March 2024, compared to 1.5x at year-end 2023.

In March, 2024, we issued a new €600 million Eurobond with a 5-year term and 3.250% annual coupon.

Shares outstanding, share buybacks, and dividends

As of March 31, 2024, the number of issued ordinary shares outstanding (excluding 9.3 million shares held in treasury) was 239.2 million.

In the year to date (through April 29), we have repurchased 2.5 million ordinary shares for a total consideration of €353 million (average share price €141.86). This includes a block trade of €48.0 million executed on February 22, 2024, to offset the dilution caused by our incentive share issuance.

For the period starting May 2, 2024, up to and including December 27, 2024, we have engaged third parties to execute approximately €647 million in share buybacks on our behalf, within the limits of relevant laws and regulations (in particular Regulation (EU) 596/2014) and Wolters Kluwer’s Articles of Association. For the period after November 10, 2024, this mandate is subject to authorization by the AGM on May 8, 2024. Share repurchases will be used for capital reduction purposes through share cancelation. The share repurchase program may be suspended, discontinued, or modified at any time.

At the Annual General Meeting to be held on May 8, 2024, shareholders will be asked to approve a total dividend of €2.08 over financial year 2023, an increase of 15% compared to the 2022 dividend. If approved, the final dividend of €1.36 per share will be paid to shareholders on June 4, 2024 (ADRs: June 11, 2024). The interim dividend for 2024 will be set at 40% of the 2023 total dividend.

Sustainability developments

Across the group, the focus in early 2024 has been on reinforcing a range of initiatives that foster diversity, engagement, and belonging, including career development programs and employee networks. Our global real estate team began executing on plans to deliver a reduction in square meters of office space in 2024, while at the same time improving the quality of workspaces for employees. These plans will help us reach our SBTi²-validated targets.

Full-year 2024 outlook

Our group-level guidance for 2024, shown in the table below, is unchanged. We continue to expect sustained good organic growth in 2024, in line with the prior year, and a further modest increase in the adjusted operating profit margin. Due to phasing of investment expenses, margin improvement is expected to be modest in the first half.

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 EPS³.

We include restructuring costs in adjusted operating profit. We expect 2024 restructuring costs to be in the range of €10-€15 million (FY 2023: €15 million). We expect adjusted net financing costs⁴ in constant currencies to increase to approximately €60 million. We expect the benchmark tax rate on adjusted pre-tax profits to increase and to be in the range of 23.0%-24.0% (FY 2023: 22.9%).

Capital expenditures are expected to remain at the upper end of our guidance range of 5.0%-6.0% of total revenues (FY 2023: 5.8%). We expect the full-year 2024 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 2024 organic revenue growth by division is summarized below. We expect the increase in full-year 2024 adjusted operating profit margin to be driven primarily by our Health, Legal & Regulatory, and Corporate Performance & ESG divisions. The Tax & Accounting margin is expected to decline slightly due to increased product investment.

Health: we expect full-year 2024 organic growth to be in line with prior year (FY 2023: 6%).

Tax & Accounting: we expect full-year 2024 organic growth to be slightly below prior year (FY 2023: 8%), due to slower growth in non-recurring outsourced professional services and the absence of one-off favorable events in Europe.

Financial & Corporate Compliance: we expect full-year 2024 organic growth to be in line with or better than prior year (FY 2023: 2%) as transactional revenues are expected to stabilize.

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

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

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 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

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 pandemics; 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 EHS/ORM = environmental, health & safety and operational risk management.
² SBTi = Science Based Targets initiative.
³ 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.
⁴ 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.

Attachment

• 2024.05.01 Wolters Kluwer First-Quarter 2024 Trading Update

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