Wolters Kluwer 2024 Full-Year Report

Wolters Kluwer 2024 Full-Year Report

Alphen aan den Rijn, February 26, 2025 – Wolters Kluwer, a global leader in professional information solutions, software and services, today releases its full-year 2024 results.

Highlights

• Revenues €5,916 million, up 6% in constant currencies and up 6% organically.
  • Recurring revenues (82% of total revenues) up 7% organically; non-recurring trends varied.
  • Expert solutions (59% of total revenues) grew 7% organically.
  • Cloud software (19% of total revenues) grew 16% organically.
• Adjusted operating profit €1,600 million, up 8% in constant currencies.
  • Adjusted operating profit margin of 27.1%.
  • Includes a €27 million one-time pension gain and restructuring costs of €28 million.
• Diluted adjusted EPS €4.97, up 9% overall and up 11% in constant currencies.
• Adjusted free cash flow €1,276 million, up 9% in constant currencies, ahead of expectation.
• Net-debt-to-EBITDA of 1.6x; return on invested capital (ROIC) improved to 18.1%.
• Proposed 2024 total dividend €2.33 per share, an increase of 12%.
• Announcing 2025 share buyback of up to €1 billion, of which €100 million completed in the year to date.
• Outlook 2025: expect good organic revenue growth and adjusted operating profit margin improvement, with mid-single-digit growth in diluted adjusted EPS reflecting higher financing cost and tax.
• Nancy McKinstry to retire in early 2026; Stacey Caywood nominated successor.

Full-Year Report of the Executive Board

Nancy McKinstry, CEO and Chair of the Executive Board, commented: “Wolters Kluwer delivered another year of 6% organic growth and a further increase in the adjusted operating profit margin. Recurring revenues, in particular cloud software subscriptions, continued to be the main driver of our growth. We maintained product investment at high levels, introducing GenAI-enabled features across many of our platforms and launching several new solutions. We are confident in delivering another set of good results in 2025.”

Full-Year 2025 Outlook

Our guidance for full-year 2025 is provided in the table below. We expect to achieve full-year 2025 organic growth in line with the prior year (6%). Organic growth is expected to be more modest in the first two quarters due to challenging comparables in Health and Tax & Accounting. The adjusted operating profit margin is expected to see improvement in 2025 led by Health and Corporate Performance & ESG.

In 2024, Wolters Kluwer generated over 60% of its revenues and adjusted operating profit in North America. As a rule of thumb, based on our 2024 currency profile, each 1 U.S. cent move in the average €/$ exchange rate for the year causes an opposite change of approximately 4.5 euro cents in diluted adjusted EPS.

Restructuring costs are included in adjusted operating profit. We expect 2025 restructuring costs to be in the range of €5-15 million (FY 2024: €28 million). We expect adjusted net financing costs¹ in constant currencies to increase to approximately €75 million. The benchmark tax rate on adjusted pre-tax profits is expected to rise in 2025 but to remain in the range of 23.0%-24.0% (FY 2024: 23.1%).

Capital expenditures are expected to be in the range of 5.0%-6.0% of total revenues (FY 2024: 5.3%). We expect the full-year 2025 cash conversion ratio to be within 95%-100% (FY 2024: 102%), due to higher capital expenditures and lower 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. The acquisition of RASi, if completed, is expected to have an immaterial impact on near term adjusted earnings.

2025 outlook by division

Our guidance for 2025 organic revenue growth by division is based on a pro forma view reflecting the transfer of our Finance, Risk & Reporting (FRR)² unit to the Financial & Corporate Compliance division (See Appendix 4).

Health: we expect full-year 2025 organic growth to be in line with or slightly below prior year (FY 2024: 6%) with the first half facing challenging comparables across the division.

Tax & Accounting: we expect full-year 2025 organic growth to be in line with prior year (FY 2024: 7%), with the first half facing a more challenging comparable.

Financial & Corporate Compliance: we expect full-year 2025 organic growth to be slightly below prior year (FY 2024: 5% pro forma including FRR).

Legal Regulatory: we expect full-year 2025 organic growth to be in line with prior year (FY 2024: 5%).

Corporate Performance & ESG: we expect full-year 2025 organic growth to be above prior year (FY 2024: 6% pro forma excluding FRR) reflecting higher growth for CCH Tagetik.

Strategic priorities 2025-2027

Our strategic plan for the next three years (2025-2027) marks a further evolution of the direction we have been following. Our goal is to drive long-term sustainable value and profitable revenue growth by providing expert solutions and services that deliver increased productivity and improved outcomes for professionals. Expert solutions combine deep domain knowledge with state-of-the-art technology to deliver information and actionable insights as part of automated and integrated workflows.

In 2024, expert solutions, which include our software products and certain advanced information solutions, accounted for 59% of total revenues (FY 2023: 58%) and grew 7% organically. Software made up 45% of total revenues and grew 7% organically. Of this, recurring cloud software grew 16% organically and accounted for 42% of total software revenues, exceeding on-premise software revenues for the first time.

Our strategy is centered on organic growth and product innovation, supplemented by selective acquisitions that enhance our value. Our three-year plan envisages spending approximately 11% of total revenues each year on product development and innovation. Our priorities for the next three years are:

• Scale expert solutions: we intend to increase penetration of cloud-based expert solutions promoting subscription revenue models (SaaS). We will continue to embed artificial intelligence (AI) into customer workflows and to harness our content and data to deliver insights for customers.
• Accelerate growth: we will continue pursuing high-growth adjacencies with a build, buy, or partner approach. We will accelerate innovation which advances customer productivity and outcomes while further developing partnerships to extend our market reach.
• Evolve capabilities: we intend to enhance our go-to-market capabilities and sales effectiveness. We will embrace new technologies to drive operational performance and foster a great place to work and best-in-class ESG performance.

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

CEO succession plan

In a separate release today, Wolters Kluwer announced that Nancy McKinstry, Chief Executive Officer, will retire in February 2026 following a one-year transition period. At the Annual General Meeting of Shareholders in May, the Supervisory Board will nominate Stacey Caywood, the current CEO of Wolters Kluwer Health, as a member of the Executive Board, with the intention of appointing her as CEO of Wolters Kluwer in February 2026. As CEO of Health, Ms. Caywood has been leading the further evolution of our healthcare solutions by leveraging generative AI and other technologies with our leading content. As CEO of the Legal & Regulatory, she led a strategic transformation which returned the business to growth and good margins.

Divisional management update

Steve Meirink, who led our Financial & Corporate Compliance division, informed us of his decision to pursue opportunities outside of Wolters Kluwer as of January 2025. We expect to announce the new CEO of Financial & Corporate Compliance in a matter of weeks. Until such time, the role is being fulfilled by Nancy McKinstry.

Agreement to acquire Registered Agent Solutions, Inc.

On February 7, 2025, we announced an agreement to acquire Registered Agent Solutions, Inc. (RASi) for approximately $415 million in cash. Subject to regulatory clearances and customary closing conditions, we expect the transaction to close in the first half of 2025. RASi offers registered agent services and other compliance solutions and will expand CT Corporation’s presence in the small and mid-sized businesses. In 2024, RASi generated revenues of approximately $52 million (unaudited) and has a track record of profitability. The acquisition is expected to reach a return on invested capital at or above Wolters Kluwer’s after-tax weighted average cost of capital (8%) in its fifth full year of ownership. In the near term, the acquisition is expected to have an immaterial impact on Wolters Kluwer adjusted earnings.

Transfer of Finance, Risk & Reporting to Financial & Corporate Compliance division

As per January 1, 2025, our Finance, Risk & Reporting unit (FRR) was transferred into the Financial & Corporate Compliance division where it will be more closely aligned to our other banking software and services. FRR was part of the Corporate Performance & ESG (CP&ESG) division in 2023 and 2024 and had revenues of €123 million in 2024. The transfer will allow CP&ESG to focus on its three global enterprise software platforms (Enablon, CCH Tagetik, and TeamMate). See Appendix 4 for pro forma divisional revenues and adjusted operating profit.

Capital allocation and target leverage range

We use our 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.

Since 2011, our twelve months’ rolling net-debt-to-EBITDA ratio has fluctuated between 1.3x and 2.4x, providing a strong and secure financial foundation for our business. As we execute on our strategic priorities, we will aim to maintain leverage in the range of 1.5x to 2.5x. We may temporarily deviate from this range, but our high proportion of recurring revenues and resilient free cash flows give us the ability to rapidly return to this range.

Dividend policy and proposed final 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 ratio³ 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 considers 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.

At the 2025 Annual General Meeting of Shareholders, we will propose a final dividend of €1.50 per share, which would result in a total dividend over the 2024 financial year of €2.33 per share, an increase of 12%. Dividends are paid in cash. Shareholders can choose to reinvest interim and final dividends by purchasing additional Wolters Kluwer shares through the Dividend Reinvestment Plan (DRIP) administered by ABN AMRO Bank N.V.

Share buybacks 2024 and 2025

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, 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.

In 2024, we completed share repurchases of €1 billion (6.7 million shares at an average price of €149.23). See Note 8 for further information on issued share capital.

We are today announcing our intention to repurchase shares for up to €1 billion in 2025. In the year to date, up to and including February 24, 2025, we have repurchased €100 million in shares (583,629 shares at an average price of €171.34). 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. For the period starting February 28, 2025, up to and including May 5, 2025, we have mandated a third party to execute €155 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.

Full-Year 2024 Results

Benchmark figures

Group revenues were €5,916 million, up 6% overall and up 6% in constant currencies. The effect of currency and the net effect of divestments and acquisitions were both negligible in 2024, and organic revenue growth was also 6% (FY 2023: 6%).

Revenues from North America accounted for 64% of total group revenues and grew 6% organically (FY 2023: 5%). Revenues from Europe, 28% of total revenues, grew 5% organically (FY 2023: 7%). Revenues from Asia Pacific and Rest of World, 8% of total revenues, grew 6% organically (FY 2023: 9%).

Adjusted operating profit was €1,600 million (FY 2023: €1,476 million), up 8% in constant currencies, resulting in a margin of 27.1%. Adjusted operating profit included a €27 million one-time non-cash gain related to an amendment to our Dutch pension fund. Excluding the pension gain, the adjusted operating profit margin increased 20 basis points to 26.6% (FY 2023: 26.4%), within our guidance range (26.4%-26.8%)⁴. Included in adjusted operating profit were restructuring expenses of €28 million (FY 2023: €15 million).

Investment in product development spending (including capitalized spend) increased 6% in constant currencies and amounted to 11% of revenues in 2024 (FY 2023: 11%).

Adjusted net financing costs increased to €62 million (FY 2023: €27 million) due to lower interest income on lower average cash balances combined with higher coupon interest on refinanced debt. In addition, in 2024, we recorded a €9 million net foreign exchange loss, mainly on the translation of intercompany balances, whereas the prior year had benefitted from a €7 million net foreign exchange gain.

Adjusted profit before tax was €1,540 million (FY 2023: €1,450 million), up 7% in constant currencies. The benchmark tax rate on adjusted profit before tax increased to 23.1% (FY 2023: 22.9%), mainly due to unfavorable movements in our deferred tax positions and the negative impact of Pillar II global minimum tax rules.

Adjusted net profit was €1,185 million (FY 2023: €1,119 million), an increase of 7% in constant currencies.

Diluted adjusted EPS was €4.97 (FY 2023: €4.55), 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 238.4 million (FY 2023: 246.0 million).

IFRS reported figures

Reported operating profit increased 9% to €1,441 million (FY 2023: €1,323 million), largely reflecting the increase in adjusted operating profit. Reported operating profit included a net loss of €3 million on the divestment of a continuing medical education unit, whereas the prior year included a disposal gain of €4 million. Amortization and impairments of acquired identifiable intangible assets and goodwill increased 2% to €149 million.

Reported financing results amounted to a net cost of €65 million (FY 2023: €27 million cost) reflecting the change in adjusted net financing cost.

The reported effective tax rate reduced to 21.7% (FY 2023: 22.4%) reflecting the positive tax impact of the divestment of our continuing medical education unit (Learner’s Digest) on August 30, 2024.

Net profit for the year increased 7% overall to €1,079 million (FY 2023: €1,007 million). Diluted EPS increased 11% overall to €4.52 (FY 2023: €4.09), reflecting the increase in net profit and the reduction in weighted average number of shares outstanding.

Cash flow

Adjusted operating cash flow was €1,627 million (FY 2023: €1,476 million), up 10% in constant currencies. This reflects a full-year cash conversion ratio of 102% (FY 2023: 100%), which was higher than anticipated. Working capital inflows of €82 million were lower than in the prior year (FY 2023: €98 million). Capital expenditures were €313 million. Capex as a percent of revenues declined to 5.3% of revenues (FY 2023: 5.8%). Cash payments related to leases, including lease interest paid, were €70 million (FY 2023: €74 million). Depreciation of physical assets, amortization and impairment of internally developed software, and depreciation of right-of-use assets totaled €330 million (FY 2023: €299 million).

Net interest paid, excluding lease interest paid, increased to €34 million (FY 2023: €17 million), reflecting the higher coupon interest and lower interest income on cash balances. Income tax paid decreased to €318 million (FY 2023: €325 million). The net cash effect of restructuring was €7 million inflow (FY 2023: outflow of €1 million). As a result, adjusted free cash flow was €1,276 million (FY 2023: €1,164 million), up 9% in constant currencies.

Total acquisition spending, net of cash acquired and including transaction costs, was €342 million (FY 2023: €68 million) and primarily relates to the acquisition of the Isabel Group accountancy solutions by Tax & Accounting on September 5, 2024. Dividends paid amounted to €521 million (FY 2023: €467 million). The cash deployed towards share repurchases was €1 billion, in line with the prior year (FY 2023: €1 billion).

Net debt, leverage, credit facility, and liquidity

As of December 31, 2024, net debt was €3,134 million, up from €2,612 million on December 31, 2023. The net-debt-to-EBITDA ratio increased to 1.6x at year end 2024 (FY 2023: 1.5x). Gross debt of €4,090 million includes the €600 million Eurobond (5-year term; 3.250% annual coupon) issued on March 18, 2024. As of December 31, 2024, net cash available was €945 million⁵, and our €600 million multi-currency credit facility remained undrawn.

Sustainability and ESG achievements 2024

In 2024, we continued efforts to attract, develop, motivate, and retain talent globally. Our employee turnover rate improved to 9.5% (FY 2023: 9.8%) in what remain competitive markets for talent. Our employee engagement and belonging scores, measured by an independent third party, Microsoft Glint, were stable at 78 and 75, respectively (FY 2023: 78 and 75). The Glint Global Top 25% benchmarks for these two measures were also stable while the Glint Global Median benchmarks declined slightly. We conducted our first global pay equity analysis and determined that the adjusted⁶ gender pay-gap ratio was 3.1% in 2024.

In 2024, our scope 1 and 2 greenhouse gas (GHG) emissions, which are based on energy purchased and consumed in our offices around the world, were reduced by 11%, compared to 2023. This reduction was in large part the result of our real estate decarbonization program which reduced our global office footprint (m²) by 9% underlying compared to year-end 2023 (FY 2023: 5% reduction). In January 2025, we raised our near-term (2030) emissions reduction targets for scope 1 and 2 to 60% (previously 50%) from a 2019 base year. We continue to target a 30% reduction in scope 3 emissions by 2030 from a 2019 base year. In January 2025, we submitted our long term (2050) targets to become net zero to the Science Based Targets initiative (SBTi) for validation.

Our ESG risk rating from Morningstar Sustainalytics improved to 11.37 (2023: 14.35), which continues to qualify Wolters Kluwer as top-rated in the Software & Services sector, ranked in the leading 2% of 962 Software and Services companies. Wolters Kluwer has retained the highest MSCI ESG rating of AAA for the 6^th consecutive year (2019-2024). In February 2025, our CDP⁷ score improved to B (from C).

Our 2024 sustainability statements have been prepared in accordance with European Sustainability Reporting Standards following a mandatory framework set by the EU Corporate Sustainability Reporting Directive.

Divisional Review

Overall organic revenue growth was 6%, led by Tax & Accounting. The increase in group adjusted operating profit margin was mainly driven by Legal & Regulatory and Financial & Corporate Compliance.

Total recurring revenues, which include subscriptions and other renewing revenue streams, accounted for 82% of total revenues (FY 2023: 82%) and grew 7% organically (FY 2023: 7%). Within recurring revenues, digital and service subscriptions, sustained 8% organic growth (FY 2023: 8%).

Total non-recurring revenues increased 1% on an organic basis (FY 2023: 0%), with varied trends. Of this, total transactional revenues increased 6% organically (FY 2023: decline of 3%) while print book revenues were flat. Other non-recurring revenue streams, which include on-premise software licenses and implementation fees, declined 4% organically (FY 2023: 1% organic growth), with mixed performances by division. (See Appendix 3 for details by division).