• Revenue: EUR5.96 billion, an increase of 6% in constant currencies.
• Organic Revenue Growth: 6%.
• Adjusted Operating Profit: EUR1.6 billion, an increase of 8% in constant currencies.
• Adjusted Operating Profit Margin: Increased 70 basis points to 27.1%.
• Diluted Adjusted EPS: Increased 11% in constant currencies.
• Adjusted Free Cash Flow: EUR1.276 billion, an increase of 9% in constant currencies.
• Return on Invested Capital: Increased to 18.1%.
• Leverage Ratio: Net debt-to-EBITDA ratio of 1.6 times.
• Expert Solutions Revenue: Grew 7% organically, reaching 59% of group revenues.
• Recurring Cloud Software Revenue: Grew 16% organically, making up 42% of software revenues.
• Dividends and Share Buyback: Increased dividends and EUR1 billion share buyback.
• Health Division Organic Growth: 6%, led by Clinical Solutions.
• Tax and Accounting Organic Growth: 7%, driven by cloud solutions.
• Financial and Corporate Compliance Organic Growth: 5%.
• Legal and Regulatory Organic Growth: 5%, driven by Digital Information Solutions.
• Corporate Performance and ESG Organic Growth: 5%.

• Warning! GuruFocus has detected 5 Warning Signs with VACBF.

Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Wolters Kluwer NV (WOLTF) achieved 6% organic growth and improved its adjusted operating profit margin.
• Diluted adjusted earnings per share increased by 11% in constant currencies, and adjusted free cash flow rose by 9%, exceeding expectations.
• The company made significant progress in its strategic objectives, with Expert Solutions growing 7% organically and recurring cloud software revenues increasing by 16%.
• Return on invested capital increased to 18.1%, and the company maintained a strong balance sheet with a leverage ratio of 1.6 times.
• Wolters Kluwer NV (WOLTF) returned significant value to shareholders through increased dividends and a EUR1 billion share buyback.

Negative Points

• Corporate Performance and ESG division experienced lower-than-expected growth due to a decline in on-premise software licenses.
• The adjusted operating profit margin included a one-time noncash pension amendment gain, which contributed to the margin increase.
• Adjusted net finance costs increased due to lower interest income and higher coupon interest on refinanced debt.
• The benchmark effective tax rate increased to 23.1% due to unfavorable movements in deferred tax positions and other factors.
• The company expects organic growth to be more modest in the first two quarters of 2025 due to challenging comparables in Health and Tax and Accounting divisions.

Q & A Highlights

Q: Can you discuss the accelerated decline in license revenue for CCH Tagetik and your confidence in bringing CP&E growth back to high single-digit or low double-digit growth? A: Nancy McKinstry, CEO, explained that the decline in license revenue was due to an unexpected drop in December. However, the company is confident in improving growth as cloud solutions now represent 60% of divisional revenues, and the market remains attractive for Tagetik with continued upselling and new customer acquisitions.

Q: What is the outlook for Clinical Solutions in terms of market penetration and growth, both in the US and internationally? A: Nancy McKinstry, CEO, stated that there is still growth potential in the US, with about 60% penetration in hospitals and healthcare organizations. Internationally, there is significant room for growth, particularly outside Western Europe and North America, in regions like South America, Asia, and the Middle East.

Q: How are you structuring revenue breakeven points on subscription and cloud contracts for Tagetik compared to license and maintenance? A: Nancy McKinstry, CEO, mentioned that the focus is on growing SaaS, which has been increasing between 18% and 20%. The company is moving towards cloud solutions, and as cloud adoption continues, license revenues will become less of a drag on the division.

Q: Can you provide more detail on the expected slowdown in Financial and Corporate Compliance (F&CC) growth? A: Nancy McKinstry, CEO, explained that the slowdown is due to the EUR10 million boost from BOI in 2024, which is not expected to recur at the same level in 2025. Additionally, while transactional revenues have rebounded, they are not expected to increase significantly due to stable interest rates affecting mortgage and lien volumes.

Q: What are the strategic plans for acquisitions, and can we expect increased M&A activity? A: Kevin Entricken, CFO, stated that acquisitions will focus on building out core positions and close adjacencies. The company will continue to look for opportunities that complement its business, with a strategy to build, buy, or partner. The strong balance sheet allows for potential acquisitions if the right opportunities arise.

Q: How is the introduction of GenAI-enabled features impacting customer adoption and pricing? A: Nancy McKinstry, CEO, noted that it's still early to quantify the impact, but GenAI features are supporting retention and price increases. In some cases, they allow for upselling, and in others, they create entirely new revenue streams. Customer feedback has been positive, particularly for products that enhance productivity.

Q: What is the impact of the NIH funding cuts on the Health division, particularly in medical journals? A: Nancy McKinstry, CEO, mentioned that the impact is still unclear as the funding situation is not yet resolved. If changes occur, they might affect library budgets at academic institutions, but there has been no significant impact on the business so far.

Q: Can you discuss the competitive landscape in the US tax segment, especially with Thomson Reuters and Intuit? A: Nancy McKinstry, CEO, stated that Wolters Kluwer continues to perform well in the professional tax market, largely due to its full cloud suite in North America. While Thomson Reuters has seen growth in areas where Wolters Kluwer does not operate, the company remains competitive in its core markets.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.