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Wolters Kluwer 2021 Nine-Month Trading Update

Wolters Kluwer 2021 Nine-Month Trading Update

November 3, 2021 – Wolters Kluwer, a global leader in professional information, software solutions and services, today releases its scheduled 2021 nine-month trading update.


  • Full-year 2021 outlook increased.
  • Nine-month revenues up 6% organically.
    • Recurring revenues (81% of total revenues) up 5% organically; non-recurring revenues up 9%.
    • Digital & services revenues (92% of total revenues) up 6% organically; print up 5%.
    • Expert solutions revenues (54% of total) up 6% organically.
  • Nine-month adjusted operating profit up 14% in constant currencies.
  • Nine-month adjusted free cash flow up 30% in constant currencies.
  • Net-debt-to-EBITDA ratio 1.5x as of September 30, 2021.
  • Share buyback 2021: on track to reach 350 million.
  • Share buyback 2022: mandate signed to buy back up to 50 million in January and February 2022.

Nancy McKinstry, CEO and Chairman of the Executive Board, commented: I am pleased to report that in the first nine months of the year, we have seen consistent growth in recurring revenues, led by subscriptions to cloud software and other expert solutions. This performance continued to be enhanced by a sharp post-pandemic rebound in non-recurring revenue streams, against a low base in the prior period. Underlying operating costs increased in the third quarter, as expected, as we invest in recruiting and developing the talent to drive future growth.

Nine Months to September 30, 2021

Total revenues increased 2%, due to the negative impact of exchange rates (mainly the weaker U.S. dollar) during the first nine months of the year. In constant currencies, revenues increased 7%, with the impact of disposals outweighed by the impact of acquisitions. Excluding currency, acquisitions and disposals, organic revenue growth was 6% (9M 2020: 3%). Subscriptions and other recurring revenues (81% of total revenues) sustained 5% organic growth (9M 2020: 5%), while non-recurring revenues increased 9% organically (9M 2020: decline of 4%). Non-recurring revenues include transactional revenues in Governance, Risk & Compliance (GRC), print books, and other ad hoc revenues.

Digital and services formats grew 6% organically, with total software revenues up 6%. Total print revenues rose 5% (9M 2020: decline of 15%), mainly comprised of a 20% increase in print books revenues (9M 2020: organic decline of 23%) and a 6% decline in print subscriptions (9M 2020: decline of 10%). Revenues from North America (62% of total revenues) grew 7% organically (9M 2020: 4%) while revenues from Europe (31% of total) grew 6% (9M 2020: 2%). Asia Pacific & Rest of World (7% of total) recorded organic growth of 2% (9M 2020: 0%).

Nine-month adjusted operating profit increased 9% overall and 14% in constant currencies. The adjusted operating profit margin was up 160 basis-points year-on-year, driven mainly by operational gearing and lower restructuring costs. Nine-month margins increased year-on-year in all divisions, except Tax & Accounting, where investment was increased. In the third quarter, group-wide adjusted operating costs before restructuring costs increased by 9% in constant currencies compared to the third quarter of 2020, reflecting the expected step up in hiring and investment to support growth.

Health: Nine-month revenues increased 9% in constant currencies and 9% on an organic basis (9M 2020: 4%). Clinical Solutions delivered steady 7% organic growth in the first nine months, mainly supported by renewals, upsells, and new customer wins for both UpToDate and our drug information solutions. Patient engagement revenues remained soft in the first nine months, while performance in our clinical software unit was mixed. Health Learning, Research & Practice recorded 11% organic growth (9M 2020: 2%), driven by a strong rebound in print book sales (up 52% in the first nine months) and the first-year inclusion of the American Society of Clinical Oncology (ASCO) journal publishing contract. In addition, digital products, such as medical research platform Ovid, sustained good organic growth. Continuing medical education revenues were weak against a challenging comparable.

Tax & Accounting: Nine-month revenues increased 8% in constant currencies, with the contribution from acquisitions (XCM Solutions acquired September 2020; Vanguard Software acquired May 2021) partly offset by the deconsolidation of ProSoft (divested June 2021). Organic revenue growth was 6% (9M 2020: 4%). Corporate Performance Solutions delivered double-digit organic growth, led by by CCH Tagetik which grew 15% organically in the first nine months. Tax & Accounting North America sustained 5% organic growth, driven by strong organic growth in CCH Axcess cloud software. Tax & Accounting Europe also maintained robust organic growth while trends in Asia Pacific remained mixed.

Governance, Risk & Compliance (GRC): Nine-month revenues increased 8% in constant currencies, including the contribution from eOriginal (acquired December 2020). Organic growth was 5% (9M 2020: 4%). Legal Services (LS) recorded organic growth of 11% (9M 2020: decline of 1%), bouyed by a double-digit rebound in LS transactional revenues at CT Corporation. Enterprise Legal Management Solutions posted modest but improved organic growth. Financial Services revenues declined 3% on an organic basis, as expected, due to the challenging comparable created by PPP1 revenues in 2020. Excluding PPP, Financial Services organic growth would have been 2%, supported by Lien Solutions which recorded double-digit organic growth in transactional revenues. Finance, Risk & Reporting recorded modest organic revenue decline as a result of lower software license and implementation fees.

Legal & Regulatory: Nine-month revenues were stable in constant currencies due to several small divestitures made in 2020. Organic growth was 4% (9M 2020: decline of 2%). EHS/ORM2 and Legal Software delivered 6% organic growth (9M 2020: 7%), with double-digit growth in cloud-based software subscriptions partly offset by a decline in on-premise software licenses and implementation services. Legal & Regulatory Information Solutions revenues increased 3% organically (9M 2020: decline of 3%), driven by robust growth in digital products for legal research. While U.S. legal educational textbooks grew year-on-year, overall print revenues declined. In September, the division announced an agreement to sell the U.S. legal education assets for $88 million in cash. This transaction is currently expected to be completed around year-end 2021 and will result in a one-time, non-benchmark capital gain. As previously indicated, following completion, the after-tax proceeds (approximately €60 million) will be deployed towards share repurchases.

Corporate costs declined 8% in constant currencies in the first nine months, due to reduced costs related to projects.

Cash Flow and Net Debt

Nine-month adjusted operating cash flow increased 30% in constant currencies, driven by strong and better-than-expected working capital inflows compared to outflows in the comparable period a year ago. Net cash spending on restructuring, financing and tax increased. Adjusted free cash flow increased 30% in constant currencies.

Total net dividends paid to shareholders amounted to €352 million in the first nine months. Total acquisition spending, net of cash acquired and including transaction costs, was €100 million in the first nine months, primarily relating to the acquisition of Vanguard Software for $110 million in May 2021. Divestiture proceeds, net of cash disposed and transaction costs, were €1 million. In the first nine months, €273 million in cashflow was deployed towards the share repurchase program.

As of September 30, 2021, net debt stood at €2,309 million (year-end 2020: €2,383 million). Twelve months’ rolling net-debt-to-EBITDA was 1.5x compared to 1.7x at year-end 2020.

Environmental, Social & Governance (ESG)

In August, we completed our first diversity, equity, and inclusion (DE&I) survey, resulting in a baseline quantitative measure of belonging, which indicates the extent to which employees feel they can be authentic and fully accepted at work. The survey highlights several areas of strength and opportunity that will inform our integrated action plan to drive stronger belonging and employee engagement results in 2022.

In September, we commenced our annual all-employee compliance training program, covering general IT and cyber security, data privacy, ethics, and our company values. As of the end of October, 99% of employees had completed the course.

Share Buyback Programs

On February 24, 2021, we announced our intention to repurchase shares for up to €350 million during 2021, including repurchases to offset incentive share issuance. In the year to date, as of November 1, 2021, we have completed €299 million (3.9 million ordinary shares; average price €77.45) of this 2021 program. On November 2, we granted a mandate to a third-party to execute up to €51 million in share buybacks on our behalf in the remainder of this year (the period starting November 4, 2021, up to and including December 29, 2021). When completed, this will bring total share repurchases to €350 million in the full year.

We have also signed a second third-party mandate to execute up to €50 million in share buybacks for the period starting January 3, 2022, up to and including February 21, 2022.

Both mandates are governed by the limits of relevant laws and regulations (in particular Regulation (EU) 596/2014) and Wolters Kluwer’s Articles of Association. Repurchased shares ...

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