Wolters Kluwer N.v. · EURONEXT:WKL
Wolters Kluwer — H1 2023 Earnings Presentation
47 slides from Wolters Kluwer's earnings presentation, Aug 2, 2023
Slide 1: Wolters Kluwer 2023 Half-Year Results
Wolters Kluwer 2023 Half-Year Results Nancy McKinstry, CEO Kevin Entricken, CFO August 2, 2023 2023 Half-Year Results 1
Slide 2: Forward-looking statements
Forward-looking statements This presentation 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 uncerta
Slide 3: Agenda
Agenda • Introduction • Financial Review • Operating and Strategic Review • Outlook 2023 • Appendix: Financial Supplement (including Pro Forma figures) • Appendix: ESG Metrics 2023 Half-Year Results 3
Slide 4: Introduction
Introduction On track to meet full-year guidance. Sustained investment in AI-enabled expert solutions Financial Results Strategic and ESG Progress Accelerate Organic growth +6% Expert solutions up +7% Expert organically, 58% of revenues Solutions Adjusted operating margin 26.1%, down 210 bps Cloud s
Slide 5: Agenda
Agenda • Introduction • Financial Review • Operating and Strategic Review • Outlook 2023 • Appendix: Financial Supplement (including Pro Forma figures) • Appendix: ESG Metrics 2023 Half-Year Results 5
Slide 6: First-half 2023 results
First-half 2023 results Organic growth 6%; margin and adjusted FCF development as expected; ROIC improved (€ million, unless otherwise stated) HY 2023 HY 2022 Δ Δ CC Δ OG Revenues 2,725 2,600 +5% +4% +6% Adjusted operating profit 711 734 -3% -4% -3% Adjusted operating profit margin 26.1% 28.2% Dilut
Slide 7: Revenues by division
Revenues by division Organic growth led by Tax & Accounting and Corporate Performance & ESG (€ million) HY 2023 HY 2022 Δ Δ CC Δ OG Health 725 674 +8% +6% +6% Tax & Accounting 735 680 +8% +8% +8% Financial & Corporate Compliance 519 506 +3% +1% +1% Legal & Regulatory 423 445 -5% -5% +4% Corporate Pe
Slide 8: Revenues by type
Revenues by type Digital and services subscriptions sustain strong organic growth (8%); most non- recurring revenues declined Organic Growth (%) Organic Growth (%) Recurring Revenue Types (82% of total) Non-recurring Revenue Types (18% of total) 74% of total 30% 30% revenue 20% 20% 9% of total reven
Slide 9: Adjusted operating profit by division
Adjusted operating profit by division Margin decline due to expected increase in personnel cost and higher product investments Margin (€ million) HY 2023 HY 2022 Δ Δ CC Δ OG HY 2023 HY 2022 Health 217 216 +1% -1% -1% 30.0% 32.0% Tax & Accounting 258 249 +3% +3% +3% 35.1% 36.7% Financial & Corporate
Slide 10: Operating cost base
Operating cost base Cost base has now largely normalized as majority of open jobs have been filled and temporary savings of the Covid years have faded Ultimo FTEs1 +6% 20,000 During COVID years (2020-2022), we made temporary cost savings: 16,000 • Slower hiring • Lower personnel-related costs 12,000
Slide 11: Adjusted net profit and EPS
Adjusted net profit and EPS Adjusted EPS up 2% in constant currencies, benefitting from lower financing cost and share count (€ million, unless otherwise stated) HY 2023 HY 2022 ∆ ∆ CC Revenues 2,725 2,600 +5% +4% Adjusted operating profit 711 734 -3% -4% Adjusted operating profit margin 26.1% 28.2%
Slide 12: Adjusted free cash flow
Adjusted free cash flow Adjusted FCF down 2% in constant currencies largely reflecting the trend in adjusted operating profit (€ million, unless otherwise stated) HY 2023 HY 2022 ∆ ∆ CC Adjusted operating profit 711 734 -3% -4% Depreciation, amortization, and impairment of other intangibles 111 109
Slide 13: Movement in net debt
Movement in net debt Modest rise in leverage to 1.5x, reflecting timing of 2023 share repurchases (€ million, unless otherwise stated) HY 2023 FY 2022 HY 2022 Net debt at start of period (2,253) (2,131) (2,131) Adjusted free cash flow 495 1,220 497 Dividends paid (247) (424) (264) Acquisition spendi
Slide 14: Dividends and share buybacks
Dividends and share buybacks 2023 interim dividend €0.72; progress on 2023 share buyback Dividend per Share (€) Share Buybacks (€ million) Intended 1.81 Total Completed dividend 1,000 1,000 1.57 1.36 1.18 0.98 550 410 350 350 504 Interim 0.63 0.72 dividend 0.47 0.54 0.34 0.39 2018 2019 2020 2021 202
Slide 15: Results summary
Results summary On track to meet our full-year guidance Organic growth Adjusted operating Diluted adjusted EPS +6% profit margin +2% 26.1% down 210bps in constant currencies ROIC 15.4% Adjusted FCF Strong balance sheet Interim dividend €0.72 €495 million, down 2% in constant Net-debt-to-EBITDA 2023
Slide 16: Agenda
Agenda • Introduction • Financial Review • Operating and Strategic Review • Outlook 2023 • Appendix: Financial Supplement (including Pro Forma figures) • Appendix: ESG Metrics 2023 Half-Year Results 16
Slide 17: Health
Health Organic growth +6%, led by Clinical Solutions; margin reflects increase in personnel costs coupled with higher product investment € million HY 2023 HY 2022 Δ Δ CC Δ OG Clinical Solutions • Revenues up +7% organically Revenues 725 674 +8% +6% +6% • UpToDate, drug data, and patient Adjusted ope
Slide 18: Tax & Accounting
Tax & Accounting Organic growth +8%, with cloud software up +18%; margin reflects increased personnel costs and related expenses € million HY 2023 HY 2022 Δ Δ CC Δ OG Tax & Accounting North America • Revenues up +9% organically, supported by Revenues 735 680 +8% +8% +8% strong uptake of CCH Axcess c
Slide 19: Financial & Corporate Compliance
Financial & Corporate Compliance Organic growth +1%, supported by recurring revenues; margin reflects increase in personnel costs and product investment € million HY 2023 HY 2022 Δ Δ CC Δ OG Legal Services • Revenues up +1% organically, supported by Revenues 519 506 +3% +1% +1% recurring service sub
Slide 20: Legal & Regulatory
Legal & Regulatory Organic growth +4%, led by digital subscriptions; margin reflects increase in personnel costs and related expenses Legal & Regulatory Information Solutions € million HY 2023 HY 2022 Δ Δ CC Δ OG • Organic growth +4%, driven by digital Revenues 423 445 -5% -5% +4% information soluti
Slide 21: Corporate Performance & ESG
Corporate Performance & ESG Organic growth +10%; margin reflects increase in personnel costs coupled with higher product investment € million HY 2023 HY 2022 Δ Δ CC Δ OG EHS/ORM • Enablon grew +18% organically, despite a Revenues 323 295 +9% +10% +10% challenging comparable Adjusted operating Corpor
Slide 22: Strategic progress
Strategic progress Forged ahead on our 2022-2024 strategic plan Product development • Grew expert solutions +7% organically (now 58% of total revenues), spend1 to be approximately Accelerate including cloud-based software revenues +15% organically 10% of revenues Expert • Increased product developme
Slide 23: Generative AI
Generative AI Over 10 years experience in leveraging artificial intelligence to the benefit of customers. Actively experimenting with generative LLMs Selected products/services using AI ML NLP BOT DL Potential use cases for • UpToDate • CT Registered Agent Services generative AI • Ovid • Expere Lang
Slide 24: Agenda
Agenda • Introduction • Financial Review • Operating and Strategic Review • Outlook 2023 • Appendix: Financial Supplement (including Pro Forma figures) • Appendix: ESG Metrics 2023 Half-Year Results 24
Slide 25: Guidance 2023
Guidance 2023 Reiterating 2023 guidance: continue to expect margin improvement in full year Performance indicators 2023 Guidance 2022 Actual Adjusted operating profit margin* 26.1%-26.5% 26.1% Adjusted free cash flow** Around €1,200 million €1,220 million ROIC* 16.5%-17.0% 15.5% Diluted adjusted EPS
Slide 26: Divisional outlook 2023
Divisional outlook 2023 Divisional guidance re-cast to reflect new organizational structure Division Full-year 2023 Outlook • Organic growth to be in line with prior year Health • Adjusted operating profit margin to be stable • Organic growth to be lower than in the prior year Tax & Accounting • Adj
Slide 27: Agenda
Agenda • Introduction • Financial Review • Operating and Strategic Review • Outlook 2023 • Appendix: Financial Supplement (including Pro Forma figures) • Appendix: ESG Metrics 2023 Half-Year Results 27
Slide 28: Pro forma divisions: revenues by division
Pro forma 4 divisions: revenues by division (€ million) HY 2023 HY 2022 Δ Δ CC Δ OG Health 725 674 +8% +6% +6% Tax & Accounting 921 843 +9% +9% +9% Governance, Risk & Compliance 647 638 +1% 0% 0% Legal & Regulatory 432 445 -3% -3% +6% Total revenues 2,725 2,600 +5% +4% +6% Δ: % Change; ∆ CC: % Chang
Slide 29: Pro forma divisions: adjusted operating profit by division
Pro forma 4 divisions: adjusted operating profit by division Margin (€ million) HY 2023 HY 2022 Δ Δ CC Δ OG HY 2023 HY 2022 Health 217 216 +1% -1% -1% 30.0% 32.0% Tax & Accounting 267 270 -1% -2% -2% 28.9% 32.0% Governance, Risk & Compliance 197 206 -4% -5% -6% 30.5% 32.2% Legal & Regulatory 62 69 -
Slide 30: Pro forma divisions: growth rates
Pro forma 4 divisions: growth rates ∆ ∆ CC ∆ OG % % Change % Net Effect % % Currency in Constant Acquisitions Organic HY 2023 HY 2022 Change Impact Currencies & Disposals Growth Revenues Health 725 674 +8% +2% +6% 0% +6% Tax & Accounting 921 843 +9% 0% +9% 0% +9% Governance, Risk & Compliance 647 63
Slide 31: Revenues by type
Revenues by type (€ million) HY 2023 HY 2022 ∆ ∆ CC ∆ OG Digital and services subscriptions 2,023 1,890 +7% +6% +8% Print subscriptions 66 76 -13% -13% -8% Other recurring 139 135 +2% +1% +4% Recurring revenues 2,228 2,101 +6% +5% +7% Print books 54 55 -2% -3% -1% LS transactional (FCC1 and LR2) 142
Slide 32: Revenues by media format
Revenues by media format (€ million) HY 2023 HY 2022 ∆ ∆ CC ∆ OG Software 1,226 1,136 +8% +8% +7% Other digital1 1,076 1,029 +5% +4% +6% Total Digital 2,302 2,165 +6% +6% +7% Services 269 265 +2% 0% +2% Print 154 170 -10% -10% -7% Total revenues 2,725 2,600 +5% +4% +6% ∆: % Change; ∆ CC: % Change in
Slide 33: Cloud-based expert solutions
Cloud-based expert solutions Cloud software revenues grew +15% organically and account for more than a third of software revenues HY 2023 Revenues HY 2023 Software Organic growth HY 2023 (HY 2022): €2.7 billion Revenues €1.2 billion Total software: +7% (+9%) Split by Media Format Cloud software: +15
Slide 34: Reconciliation: adjusted net financing costs to financing results
Reconciliation: adjusted net financing costs to financing results (€ million) HY 2023 HY 2022 Adjusted net financing costs (10) (42) Employee benefits financing component (1) (1) Change in fair value of financial assets - - Result on divestment of financial assets - - Divestment related results on e
Slide 35: IFRS profit and diluted EPS
IFRS profit and diluted EPS (€ million, unless otherwise stated) HY 2023 HY 2022 ∆ Adjusted operating profit 711 734 -3% Amortization & impairment of acquired intangibles (75) (88) Results on divestments of operations 5 (4) Other non-benchmark items1 (9) (2) Operating profit 632 640 -1% Financing re
Slide 36: Balance sheet
Balance sheet (€ million, unless otherwise stated) June 30, 2023 Dec. 31, 2022 June 30, 2022 Goodwill and intangible assets 5,983 6,042 6,114 Property, plant and equipment 81 79 83 Right-of-use assets 255 283 306 Deferred tax and other non-current assets 112 129 129 Total non-current assets 6,431 6,
Slide 37: Debt maturity profile
Debt maturity profile Debt Maturity Profile – June 30, 2023 (€ million) Net debt breakdown: € million 1,123 Gross financial debt 3,303 Lease liabilities 286 Total gross debt 3,589 Less: Cash & cash equivalents and derivatives 1,123 Net debt 2,466 707 536 561 530 510 463 128 64 54 19 9 9 Cash & cash
Slide 38: Currency impact
Currency impact HY 2023 Revenues by Currency British pound 3% Other 7% Euro 22% U.S. dollar 68% Impact in € million on Adjusted operating Average rates Revenues profit 1 Euro HY 2023 HY 2022 HY 2023 HY 2023 U.S. dollar 1.08 1.10 21 9 British pound 0.88 0.84 (3) 0 Canadian dollar 1.46 1.39 (2) (1) Au
Slide 39: Growth rates
Growth rates ∆ ∆ CC ∆ OG % % Change % Net Effect % % Currency in Constant Acquisitions Organic HY 2023 HY 2022 Change Impact Currencies & Disposals Growth Revenues Health 725 674 +8% +2% +6% 0% +6% Tax & Accounting 735 680 +8% 0% +8% 0% +8% Financial & Corporate Compliance 519 506 +3% +2% +1% 0% +1%
Slide 40: Agenda
Agenda • Introduction • Financial Review • Operating and Strategic Review • Outlook 2023 • Appendix: Financial Supplement (including Pro Forma figures) • Appendix: ESG Metrics 2023 Half-Year Results 40
Slide 41: ESG Metrics
ESG Metrics • ESG Ratings • Environmental: decarbonization • Social: employee culture • Social: diversity • Governance: stewardship • Governance: board skills 2023 Half-Year Results 41
Slide 42: ESG Ratings
ESG Ratings Sustainalytics ESG Risk Rating (2023) MSCI ESG Rating 0 10 20 30 40 50 AAA AA Wolters Kluwer 16.1 A FactSet 18.4 BBB Intuit 16.4 BB Sage Group 18.3 B Constellation Software 27.6 CCC Dassault Systèmes 18.4 Aspen Technology 18.8 2018 2019 2020 2021 2022 2023 Sustainalytics risk rating: sca
Slide 43: Environmental
Environmental HY 2023 progress on environment programs Scope 1 & 2 Emissions per FTE1,2 • Approximately 290 on-premise servers Metric tons CO2e emissions/FTE decommissioned, and 5 data centers closed 2.0 • Office footprint (m2) reduced by 2% organically 1.79 (from year-end 2022) 1.67 • Business trav
Slide 44: Social: employee culture
Social: employee culture Employee Engagement Score1 Employee Participation in Learning Wolters Kluwer Glint Global Benchmark % of Employees with Access to Learning High-Performing Norm % of Employees Making Use of Optional Curricula 100% 100% 84% 76% 77% 76% 76% 77% 80% 83% 71% 50% 55% 60% 40% 0% 20
Slide 45: Social: diversity
Social: diversity Belonging Score1 Supervisory Board Members: % Female 100 80% 57% Belonging measures the extent to which employees believe 43% 43% 43% 43% 43% 72 73 75 they can bring their authentic 40% selves to work and be accepted for who they are 50 0% 2017 2018 2019 2020 2021 2022 2017 2018 20
Slide 46: Governance: stewardship
Governance: stewardship Product Development Spend Annual Compliance Training (includes operating expenses and capital expenditures) (includes ethics, data privacy, IT and cybersecurity) % of Total Revenues % of Employees Completed 12% 100% 97% 99% 99% 99% 99% 99% 10% 50% 8% 6% 0% 2017 2018 2019 2020
Slide 47: Governance: board skills
Governance: board skills Supervisory Board Skills Experience & Competencies Additional Public Directorships Cybersecurity Technology & Independent Committees Development Organization, Social Policy, Management Marketing & Information Commercial Accounting, Company Member AC= Audit General Finance Ge