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Operator: Good day, and thank you for standing by. Welcome to the Wolters Kluwer Half Year 2025 Results Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand over to your host, Meg Geldens, Vice President, Investor Relations, to begin today's conference. Please go ahead.
Margaret Helene Geldens: Thank you, Sandra, and welcome, everyone, to our half year 2025 results presentation. Today's earnings release and the slides are available for download from the Investors section website, wolterskluwer.com. With us on the call today are Nancy McKinstry, our CEO; and Kevin Entricken, our CFO. Nancy and Kevin will discuss the highlights of our results and we'll take your questions at the end. Before we start, I'd just like to remind you that some statements we make today may be forward-looking. We caution that these statements are subject to risks and uncertainty that may cause actual results to differ materially from those indicated in these statements. The factors that could affect future financial results are discussed in Note 2 of today's release and also in our annual report. As usual, in the presentation today, we will refer to adjusted profits, which exclude nonbenchmark items. And we also refer to growth in constant currencies, which excludes the effect of exchange rate movements. And we refer to organic growth, which excludes both the effect of currency and the effect of acquisitions and disposals. Reconciliations can be found in Note 4 of our release today. At this time, I would like to hand the call over to CEO, Nancy McKinstry.
Nancy McKinstry: Thank you, Meg. Hello, everyone, and thank you for joining the call. As is customary, I'll begin with the highlights for the first half of the year and then hand it over to Kevin, who will take you through the financial results in more detail. Then I'll return and cover the divisional updates and share the progress we're making against our new strategic priorities and then wrap up with an outlook for the remainder of the year. So let's begin with the highlights on Slide 4. We had a solid start to the year with organic growth of 5%, largely as expected and a strong increase in our adjusted operating profit margin. Diluted adjusted EPS rose 14% in constant currencies and adjusted free cash flow increased by 13% in constant currencies. Return on invested capital increased to 18.5%. Balance sheet leverage has increased but remains within our target range and we've made significant cash returns to shareholders through the dividend and share buyback program. We made initial progress on the priorities of our new strategic plan. Expert Solutions grew 6% organically. Recurring cloud software revenues grew 15% organically and it speed on-premise software revenues at the group level. We made considerable progress in rolling out generative AI features across our products and are investing in Agentic AI solutions and expect to introduce these into the market this year. We made sizable investments into the higher growth mid-market corporate segment with the acquisitions of RASi and Brightflag. And earlier this month, we announced the divestment of FRR. With that, I'd now hand it over to Kevin, who will walk you through the financials in more details.
Kevin B. Entricken: My apologies for that, folks. Thank you, Nancy. Let's get right to it on Slide 6. First half revenues were EUR 3.052 billion, an increase of 6% in constant currencies. Organic growth was 5%, slightly lower than the prior period as we had guided. This was largely due to a downturn in our nonrecurring revenues, which I'll come back to in a moment. Adjusted operating profit was EUR 865 million, an increase of 14% in constant currencies. As a result, the margin increased by 190 basis points to 28.4%. The increase in adjusted operating profit drove a 14% rise in diluted adjusted earnings per share in constant currencies. Adjusted free cash flow was EUR 505 million, up 13% in constant currencies, reflecting the increase in operating profit and higher cash conversion. Net debt-to-EBITDA increased to 2.1x following the recent acquisitions. And lastly, return on invested capital increased to 18.5%. Now let's look at revenues by division on the next slide. Health grew 4% organically, slowing from 6% a year ago due to several factors. These include timing of up-to-date renewals, sharper print decline and a challenging comparable in medical research. Tax & Accounting grew 6% organically compared to 7% a year ago, which was largely due to a decline in nonrecurring outsourced professional services against a tough comparable a year ago. Financial and Corporate Compliance delivered 4% organic growth, similar to the prior period. FCC's recurring revenues grew 6% organically while FCC's transactional revenues slowed to 1% organic growth. Legal & Regulatory achieved 6% organic growth compared to 5% growth a year ago. This reflected steady growth in digital information subscriptions and favorable timing of print subscriptions. And lastly, corporate performance in ESG grew 7% organically compared to 9% a year ago. Recurring cloud-based software revenues continue to see double-digit organic growth. However, as expected, nonrecurring revenues, including on-premise software licenses declined 10% as more of our customers opt for our recurring cloud software solutions. Now let's take a look at revenue by type on Slide 8. The chart on the left shows our recurring revenue streams, which represent 84% of total revenues. Total recurring revenues grew 7% organically in line with a year ago. The largest component, digital and service subscriptions, shown by the blue line also grew 7% organically, slowing slightly from 8% a year ago. This was due to slower subscription growth in Health related to the factors I mentioned previously. Total nonrecurring revenues turned negative in the first half, declining 4%. This was due to several factors. First was a downturn in other nonrecurring revenues. This includes on-premise software licenses and implementation services. This category fell 9% organically compared to 1% growth in the comparable period. This trend is due to market demand, which favors recurring cloud software. Next, we saw a slowdown in FCC transactional revenues from 3% a year ago to 1% this year. This reflects the continued stagnation in U.S. M&A volumes and corporate lending activity. Finally, print book revenue experienced a sharp downturn. Print books were down 11% across the group and down 17% in Health. Now let's take a look at divisional margins on Slide 9. As noted, the adjusted operating profit margin increased by 190 basis points to 28.4%. This strong performance on the margin was driven by mix shift towards expert solutions and initiatives to manage discretionary expense and drive long-term efficiencies. The strong start on margin will help us in the second half as we'll face currency headwinds, additional restructuring and the absence of last year's EUR 27 million pension gain in the Netherlands. Now let's cover the rest of the P&L on the next slide. Adjusted net financing costs increased to EUR 38 million, reflecting higher gross debt and higher coupon rates on refinanced debt. Included in net financing results was a net foreign exchange gain of EUR 2 million compared to a EUR 6 million net foreign exchange loss in the prior year. Adjusted pretax profit was EUR 828 million, up 11% in constant currencies. The benchmark tax rate on adjusted pretax profits increased to 23.8% as guided and was primarily driven by an adverse movement in our deferred tax position. After-tax adjusted net profit was EUR 631 million, up 11% in constant currencies. As a result, the ongoing share buyback program the weighted average number of shares outstanding decreased by 3%. The lower share count helped offset the increase in interest and tax. As a result, we delivered a 14% increase in diluted adjusted EPS in constant currencies. Let's cash -- sorry, let's cover cash flow on Slide 11. Adjusted operating cash flow increased 19% in constant currencies, reflecting the increase in adjusted operating profit and higher cash conversion. Net working capital outflows reduced to EUR 110 million, reflecting more favorable timing of vendor payments as compared to a year ago. Capital expenditures were stable at EUR 147 million or 4.8% of revenues. We continue to expect full year CapEx to be in line with our guidance range of 5% to 6% of revenues. Cash conversion improved to 85%. We continue to expect our full year cash conversion to be in the range of 95% to 100%. Net interest paid more than doubled to EUR 53 million, reflecting the initial coupon payment on the 5-year Eurobond issued in March of last year. Taxes paid increased to EUR 192 million. This was due to higher net income and the timing of tax refunds and prepayments. All in all, adjusted free cash flow was EUR 505 million, up 13% in constant currencies. Now let's turn to the use of cash on Slide 12. Acquisition spending was significantly higher than a year ago at EUR 833 million. This included the amounts paid for RASi in March and Brightflag in June and a few smaller acquisitions. Dividends paid amounted to EUR 297 million. We've spent EUR 509 million on the share buyback in the first half. Overall, net debt increased to EUR 4.3 billion. This represents an increase of EUR 1.1 billion compared to year-end 2024. Our leverage ratio, based on a 12-month rolling EBITDA, increased to 2.1x, which remains within our target range of 1.5x to 2.5x. Now let me turn to the dividend and provide an update on our 2025 share buyback program as we move to Slide 13. In line with our policy, the interim dividend for 2025 was set at 40% of the prior year total dividend or EUR 0.93 per share. This will be paid to shareholders in September. As of this week, we have completed approximately EUR 637 million of the up to EUR 1 billion share buyback program, which we announced in February. For the period July 31, 2025, up to and including November 3, 2025, a third- party mandate is now in place to execute approximately EUR 175 million on our behalf. Let me sum up the first half results before handing it back to Nancy. Let's go to Slide 14. Organic growth was 5% as expected. We delivered a strong improvement on the margin. This helped drive a 14% constant currency increase in diluted adjusted EPS and a 13% constant currency increase in adjusted free cash flow. Return on invested capital reached 18.5%. Acquisitions increased net debt to EBITDA to 2.1x, but this remains within our target range. I'll now hand back to Nancy to cover divisional developments.
Nancy McKinstry: Thank you, Kevin. I will begin with Health on Slide 16. Health delivered 4% organic growth led by Clinical Solutions. The adjusted operating profit margin increased to 33% due to the ongoing mix shift towards Clinical Solutions, expense management and long- term efficiency initiatives. Clinical Solutions delivered 6% organic growth easing slightly compared to a year ago due to the timing of renewals, the leap year effect and product sunsets. We made good progress moving our U.S. institutional customers to the new UpToDate Enterprise Edition, which includes data analytics and AI enhanced search. Last month, we began rolling out UpToDate enterprise to European customers. Learning, research and practice slowed to 1% organic growth compared to 4% in the prior period. Excluding print, organic growth would have been 5%. As anticipated, growth in our medical research unit moderated against a tough comparable, which had benefited from the full scale distribution of the New England Journal of Medicine. In learning and practice, we delivered strong growth in our digital nursing solutions which was to a large extent, offset by a 17% decline in print books. Now let's turn to Tax & Accounting on Slide 17. In Tax & Accounting, organic growth was 6% with recurring cloud software revenues up 17%. The adjusted operating profit margin expanded by 170 basis points, reflecting operational gearing and expense management, which more than offset increased investment. North America delivered 6% organic growth, driven by double-digit organic growth in our cloud software solutions, CCH Axcess in the U.S. and CCH iFirm in Canada. Revenues in our outsourced professional service unit declined against strong double-digit growth in the comparable period. Growth in our U.S. publishing unit was stable. Europe delivered steady 7% organic growth with good performance across all regions. Growth was driven by double-digit organic growth in our European cloud and hybrid cloud solutions. So now let's turn to Finance and Corporate Compliance on Slide 18. Finance and Corporate Compliance delivered 4% organic growth, supported by 6% growth in recurring revenues. The decline in the adjusted operating profit margin reflects increased investment. Legal Services delivered a steady 6% organic growth, supported by 8% growth in recurring service subscriptions. Transactional revenues slowed to 2%, reflecting still weak M&A deal volumes in the U.S. RASi, which builds on our position in the U.S. mid-market is performing well. Financial Services grew 1% organically as 3% growth in recurring revenues was partially offset by a 4% decline in nonrecurring revenues. Our U.S. banking compliance solutions delivered steady growth. However, Lean Solutions transactional revenues declined compared to growth a year ago. Earlier this month, we announced the divestment of FRR to Regnology for an enterprise value of approximately EUR 450 million. Moving now on to Legal & Regulatory on Slide 19. Legal & Regulatory posted 6% organic growth, led by 7% growth in digital subscription revenues. The adjusted operating profit margin rose by 320 basis points driven by operational gearing, expense management and longer-term efficiency programs. Legal & Regulatory Information Solutions delivered 6% organic growth, supported by strong subscription renewals. Print products showed mixed performance. We continue to expand generative AI capabilities across key platforms in the first half. Legal & Regulatory software posted 5% organic growth led by continued strong performance in legal practice management solutions that includes Kleos and Legisway, which grew 9%. ELM solutions reported low single-digit organic growth. In June, Legal & Regulatory completed the acquisition of Brightflag, a global provider of AI-enabled legal spend and matter management solutions for midsized corporations. Now turning to Corporate Performance & ESG on Slide 20. Corporate Performance & ESG grew 7% organically with recurring cloud software revenues up 17%. The adjusted operating profit margin was broadly stable reflecting sustained investment in product development, sales and marketing. In EHS and ESG, the Enablon suite grew 10% organically, with strong growth in Europe and Asia Pacific. Recurring cloud software revenue rose 18%, while on-premise license revenues were stable. In Corporate Performance, Tax and Audit, overall organic growth was 5%. The CCH Tagetik Corporate Performance Management platform delivered 5% growth with double-digit growth in recurring cloud software. This was partially offset by a decline in nonrecurring revenues, including on-premise licenses. Our tax and audit units posted single-digit growth supported by continued momentum in our cloud software solutions. Now let me update you on the strategic progress that we are making on Slide 21. We made good progress on all 3 pillars of our strategy. Expert solutions made up 59% of total revenues and grew 6% organically in the first half. Nearly 80% of our expert solutions are software products, which overall also grew 6% organically. Within software, recurring cloud software subscription revenues grew 15% organically. These cloud software revenues now exceed on-premise software revenues at the group level. Driving penetration of our cloud solutions is of strategic importance not only because market demand is favoring cloud solutions, but also it facilitates the rapid integration of AI, including Agentic AI to support our customers with their complex daily workflows. Secondly, we also made progress on expanding and extending our presence in higher growth adjacent market segments. The acquisition of RASi and Brightflag increase our opportunities in the midsized corporate market. We also continue to expand our partnerships or sign new ones. For example, Health has expanded its list of partnerships with a new collaboration with Microsoft to integrate UpToDate into their Dragon Copilot for ambient listening and other health care workflows. And thirdly, we are making progress in upgrading our systems and capabilities to support sales effectiveness, customer support functions and go-to-market. Turning to the next slide. I'm proud to report that we have made enormous progress in proliferating generative AI features across products in the last 2 years, a significant majority of our revenues are AI-enabled and most major product suites now also include generative AI capabilities. This slide highlights examples of products that incorporate customer-facing GenAI features. These GenAI features are, of course, only in our digital offerings, which are highlighted in the color part of the chart. These GenAI features enhance customer workflows in many ways, tools such as summarization, drafting, Q&A and virtual assistance save time, raise productivity and improve outcomes. These key AI features are supporting subscription renewals and attracting new customers. This week, we are announcing an enhanced version of UpToDate to early access customers. This version will have full GenAI-enabled capabilities and will draw not only upon UpToDate's content, but also our drug databases. As always, we build responsible expert validated AI, leveraging our trusted proprietary expert content. This upgraded version will significantly increase the speed at which doctors can get a concise, accurate and transparent answer to their complex medical questions. So now let's take a look at some of the first Agentic AI solutions that we have in market for testing on the next slide. We have several Agentic AI solutions in development or in customer beta. I want to just highlight 2 examples. In Tax & Accounting, we're building AI agents into our cloud-based CCH Axcess platform. This technology will empower our customers, which are CPA and tax advisers to focus even more of their time on higher-value work as the software will not only automate tasks, but also anticipate needs, reason through problems and offer recommendations tailored by the customer in real time. In Corporate Performance & ESG, we built and recently launched Teammate AI editor. This is an Agentic GenAI writing engine that helps internal auditors improve the quality and consistency of their audit documentation. It includes a variety of prebuilt prompts tailored to audit workflows and is built with advanced data protection measures and safeguards to ensure the output is relevant, accurate and free from biased language. The development of AI agents is accelerated by our proprietary AI-enabled platform, which was created by our DXG team. This platform is being used across all divisions, and it helps us speed our development and drives economy of scale. Now let me talk about a few of the recent portfolio changes. This year, we made a number of moves that strengthen our market positions and increase our strategic focus. In March, we completed the acquisition of RASi, a U.S. provider of registered agent and other compliance services to midsized corporations. RASi builds on our existing position serving the U.S. mid-market, which is a higher growth segment than our traditionally large corporate space. RASi is performing well and the integration is well underway. In June, we acquired Brightflag, a global provider of legal spend and matter management software that extends our ELM solutions business into midsized corporations; and brings us a significant position in Europe. Brightflag is proving to be a great addition to our portfolio, and we are working to drive additional revenue synergies with ELM solutions. And as I mentioned, we agreed to divest our FRR reporting unit. This disposal will take some time to complete due to regulatory processes and employee consultations. Ultimately, this move will allow the FCC division to focus its efforts on developing its U.S. banking compliance business and corporate legal services. So now let's take a look at the outlook on the next slide. As indicated in today's release, we have updated our guidance for the full year. We continue to expect full year 2025 organic growth to be broadly in line with prior year's growth. Despite the unfavorable U.S. dollar exchange rate movement, the absence of last year's pension gain and additional restructuring costs, we now expect the adjusted operating profit margin in reported currencies to be near the top end of our guidance range. Our guidance for adjusted free cash flow is unchanged. We continue to expect between EUR 1.25 billion and EUR 1.3 billion in constant currencies. Underpinned by the improved view on margin, we now expect mid- to high single-digit growth in diluted adjusted EPS in constant currencies. Finally, due to the adverse dollar exchange rate, we now expect ROIC in reporting currencies to be around 18%. And now let's conclude with the divisional guidance on the next slide. We expected Health organic growth to be in line with or slightly below prior year. In Tax & Accounting, we expect organic growth to be in line with the prior year. For Finance and Corporate Compliance, organic growth is expected to be below the prior year due to weaker nonrecurring revenues. In Legal & Regulatory, we expect organic growth to be in line with the prior year. And lastly, in Corporate Performance & ESG, organic growth is expected to be above the prior year, reflecting higher growth for the CCH Tagetik platform. Thank you very much for your attention, and now I'll be happy to take questions.
Operator: [Operator Instructions] We will now take the first question from the line of George Webb from Morgan Stanley.
George W Webb: I've got a few questions to kick off with, please. Firstly, just touching on the margins. Clearly, a very strong performance in margins in the first half. You mentioned the 190 basis points increase year-over-year. As you also mentioned, there are a few moving parts in the second half, the pension gain restructuring. It looks to me like the upper end of the guidance maybe implies that margins in H2 this year are broadly around where they were in H2 last year, if I've got my math right. I know FX is a factor, but curious how you're approaching the second half internally around cost management and whether you're putting more investments through the business in the second half after the good cost control in the first? Secondly, on the full year growth, you've talked about growth being broadly in line with last year, which was 5.8% on organic, first half should count at about 5%. So there is some acceleration needed in the second half. You've kind of given the segmental growth outlook, but perhaps you could just summarize at a high level where maybe the main areas are that you're expecting to slightly accelerate in the second half to deliver on that ambition. And then lastly, just as we think about the SaaS and subscription transitions you're doing in the business, moving away from on- premise with perpetual licenses. Clearly, it's having some short-term negative impact on your top line within the mix as you move away from those license sales. Have you tried to quantify internally how much of a headwind that is maybe proving at present on the group's growth rate?
Nancy McKinstry: Yes. So I'll start around the second question and also touch on licenses and then turn it over to Kevin for more details around second half growth and then the margin question. So just what is going to drive acceleration of growth in the second half, it's really 3 factors. First is, of course, comparables. As we indicated, we had tough comparables in both tax and health in the first half that abates as you go into the second half. Second is we often as typical as we have higher retention period and new selling period in the second half. We are seeing good retention and good new sales. So we expect that, that will continue and accelerate in the second half. And then, of course, we have the effect of a lot of the new products that we launched last year that come stronger into the mix in the second half as well as some new things that we're also doing now in terms of product launches. So those are the 3 factors that will drive accelerated growth in the second half of 2025. In terms of licenses, the transition from on-premise to SaaS is most apparent in our CP & ESG division, primarily in the Tagetik space, Enablon, Tax, Teammate, they are further along in that transition. And so clearly, that move in Tagetik from on-premise to SaaS is clearly weighing on the organic growth of that particular unit. Now we are reaching sort of that tipping point. So as we think about 2026, we will now -- that effect will be far less in terms of the weighing on the organic growth, but we aren't disclosing the figure of what that is, but it is significant enough in that one business unit. But in the overall of Wolters Kluwer, most of that balance between on-premise and SaaS has been achieved. So with that, Kevin, do you want to touch on margin and anything else you want to add?
Kevin B. Entricken: Yes, happy to. On the margin, certainly, we're pleased to deliver the good margin in the first half of the year, the 28.4%. You are right that in the second half of the year, we will see the margin come down a little bit because we are pleased that we've got such a good first half start because in the second half, we will face headwinds from the currency, no question about that, the U.S. dollar in particular. Also, the press release today does announce a step-up in restructuring spend that we will incur in the second half of the year. We're now saying between EUR 20 million and EUR 35 million restructuring. And then finally, last year, we did have the onetime pension benefit in the Netherlands. So we do have that to overcome in the second half. But nonetheless, we are very confident in our guidance that we've updated today telling you that you should expect us to land at the top end of our guidance range.
George W Webb: That's great. Nancy, can I just ask one follow-up on the whole license to subscription transition. On Tax & Accounting, with regards to the shift from ProSystem fx to CCH Axcess. How far through that are you now?
Nancy McKinstry: Yes. So one thing that's unique in tax, just so you realize, is that we always get an annual fee even for our on-premise software because there's changes every year that are very significant, even without tax changes. And so that has been the pattern. So today, the SaaS version of the tax product or CCH Axcess, the total absolute revenues exceed now the on-premise. And that -- and the SaaS version, obviously, continues to be the growth engine of the division, not only in tax, but also in audit as we've been launching global audit.
Operator: We will now take the next question from the line of Nick Dempsey from Barclays.
Nicholas Michael Edward Dempsey: I've got 3 questions. So first of all, a bit of a follow-up on George's question on, I guess, headwind from licenses. On a group basis, your other nonrecurring lines saw an organic revenue decline of 9% in the first half. When I look back, that was minus 4 in full year, plus 1 in the first half, '24. And it's kind of spread through the divisions, so it's not just CP&E. Is that a trend now that we should expect to continue across the divisions? Or are there -- I think you've addressed Tagetik very clearly, but are there factors in the other divisions, which mean we should pencil in decent declines going forward for that particular line? The second question, maybe print books in health that's been particularly weak in the first half compared to your previous trend. Are you assuming within your guidance for health that things get better in H2 or do you have timing of orders or anything like that, that mean it will definitely get better? Just trying to understand how much hope there is around print in the second half? And then the third question, can you talk about the potential competitive threat that OpenEvidence in particular, could pose to UpToDate? Does that product come up in your renewal discussions with hospital groups? Or do you just kind of occupy different niches?
Nancy McKinstry: Yes. So why don't I cover the Health questions, and then, Kevin, if you could cover the nonrecurring because that has other things in it other than just licenses that Kevin can talk about. So just in health on the books question, it did decline in the Learning and Practice division minus 17%. We do expect that, that will improve in the second half, but still be a negative number. So -- but the first half it faced 2 things. One is books, frankly, are always a bit lumpy, but we also had a good first quarter 2024. So it was a bit of both a comparable issue and just the market factors. But again, expect it to improve a little bit in the second half, but not turn positive. And then on OpenEvidence and other competitors in the market, we remain very bullish on our prospects for UpToDate. We have a very strong market position with incredibly loyal customers, and we continue to see customers really embrace the new GenAI features that we've been introducing in the enterprise version. We've also added a layer of analytical information that allows them to understand what clinicians are looking at, et cetera. We've also announced some of these partnerships with ambient players, both Abridge and Microsoft, which allows us to integrate UpToDate into the workflow at the point of care. So we've done -- we're doing many, many things in UpToDate, and we are very confident in our competitive position. With that, Kevin, do you want to talk about nonrecurring?
Kevin B. Entricken: Yes. Other nonrecurring just to remind you, Nick, is made up of a number of different things in addition to licensing. There's also implementation fees there. There are some advertising would be in there. Consulting fees, training and the like. So in this nonrecurring line item, we do see some lumpiness from period to period. So I wouldn't necessarily take the trend as continuing. It does fluctuate with market demand. So I hope that addresses what you were going for.
Nancy McKinstry: Also in nonrecurring is things like professional services and other things as well, Nick. So it is always a little bit, as I say, lumpy on that as well.
Operator: We will now take the next question from the line of Adam Berlin from UBS.
Adam Ian Berlin: Three questions from me as well, Adam Berlin from UBS. The first question is, I know you said Nancy that now in North American tax, the cloud solution has more revenues in the on-premise solution. How far away do you think we are from kind of all the customers who want the cloud solution taking it? Are there still a lot more customers to migrate? Or are there lots of small customers do you think will just be sticky and be really hard to move off the on-premise solution? And does the investment you're making in the Agentic AI product you talked about for the cloud-only product, does that help convince more customers to move to the cloud version. So thoughts on that would be really helpful. Secondly, I know when you talked about margins, there are a lot of one-offs this year, but it does seem that on an underlying basis, you have made a lot of progress in terms of delivering efficiencies and savings. Is that something we can expect to continue? Or has there been so much progress this year that we should expect a slower progress in the next couple of years? And thirdly, can you tell us the tax impact of the disposal of FRR?
Nancy McKinstry: Okay. I'll cover the first couple and then ask Kevin to talk about FRR and elaborate. So in terms of the migration from on-premise to SaaS, both in tax, but this would be true across the enterprise is that we don't force customers. We provide our products in the media that our customers want in the form that they want. But of course, we prefer SaaS offerings for the good quality, both revenue aspects of it, but also because we know once customers do move to our SaaS solutions, particularly in tax, they add more modules. So it very much facilitates upselling. So we expect it's still going to take quite some time to get those last customers over to SaaS. I would say that the Agentic technology is going to be a catalyst because while not impossible to add Agentic technology to on-premise software, it is far more difficult, and you don't get as a customer you don't get that full benefit. So most of the investment that we're making in Agentic technology is, of course, in our SaaS solutions. So we believe that customers will want the advantages of that newer technology. And so we do see that as a catalyst. But again, we don't force them. We provide various incentives to get them to migrate, but we fully expect that, that will happen over some period of time. And then as it relates to the margin development, and I'll ask Kevin to elaborate. A big part of that is the rotation of our portfolio towards expert solutions. As we've talked in the past, the margins of our expert solutions when those products are at scale, significantly exceed the margins of our digital content. So the quality of the earnings is improving as that mix shifts. And then we've done a lot of efficiency programs and cost management as well. So Kevin, why don't you take it from there on efficiencies and also the tax impact of FRR.
Kevin B. Entricken: Yes. With regard to efficiencies, I mean, this is something we're always thinking about as we run the business. We've got efficiency programs and everything from our finance operations, content gathering and enhancement sales and marketing. So this is something that we're always looking operationally to do better. So I would say I don't see us coming to an end of being completely perfect in efficiencies. I will always have something to look forward to in the future. So that does contribute to the margin story as does the mix shift in the portfolio that Nancy pointed out. I'll also say that I think our businesses all around the world, they're just being very thoughtful about cost management during this economic backdrop as many companies are. With regard to the divestiture of FRR, we do expect to record a gain when we close that business. And obviously, there will be a tax impact related to that. I will just remind you though, FRR is a relatively small business in the portfolio. It's about EUR 123 million in revenue and a margin that is below the group average. So there will be a positive gain that we will be paying taxes on. And that is reflected in the guidance that we've given to you.
Operator: We will now take the next question from the line of Thymen Rundberg from ING Bank.
Thymen Rundberg: First one on Legal & Regulatory. You've posted 6% organic revenue growth in the first half. You continue to guide for full year growth to be in line with 2024, is 5%. So what are the underlying assumptions behind this cautious stance? Are you expecting a deceleration in the second half of '25? Or is it simply a bit of conservatism from your side? And then lastly, you've made some targeted moves into higher growth adjacencies like mid-market legal tech. And beyond this, and where do you see the next wave of scalable adjacencies, either by vertical or geography or capability that could materially shift the group's growth profile over the next, yes, let's say, 3 to 5 years?
Nancy McKinstry: Why don't I take the last question and ask Kevin to comment on the developments in Legal & Regulatory in the second half. So as you point out, our organic efforts and our potential M&A efforts are really focused on driving acceleration of growth, right? So most of our capital goes to organic activities. We invest 11% or even more in some divisions that of 11% of our revenues back in new and enhanced products. That drives a lot of that innovation, drives a lot of the new things that we're doing and enhances the growth. And then in terms of the adjacencies, we are looking to go into 2 areas. Sometimes it's within the core business. So if you look at RASi and you look at Brightflag, we're already in those markets, but these are in -- these products address the mid-market segment, which is growing faster than the large segment. So it's a nice addition, gives us both cost synergies and revenue synergies and gives us a stronger market position in that vertical area. And then the second way that we potentially drive adjacencies is through extending our workflow. And if you look at the Finca or the Isabel group that we bought, that was pre-accounting, we do accounting. So you put that together and you have a stronger integrated workflow from the customer's perspective. So that is kind of the strategic element either deeper within a vertical or horizontally in a workflow. We're looking at those kinds of things across every single division. So what we end up doing becomes in the end, very opportunistic based on the assets that might be available. So we'll continue to develop prospects over the coming years. And Kevin, do you want to talk about Legal & Regulatory?
Kevin B. Entricken: Sure. I will say that we're very pleased with the delivery of Legal & Regulatory in the first half of the year. A lot of that good performance has come from our Information Solutions businesses, and in particular, with those businesses, organic growth over the year could be impacted by the timing of when products are released. So I do still think we will have a strong second half in Legal & Regulatory. But due to some timing issues, I think that giving you guidance for the full year, to be about what it was last year, still makes perfect sense in this environment.
Operator: We will now take the next question from the line of Sami Kassab from BNP Paribas.
Sami Kassab: I have three questions please. Within FCC, financial services have been a perennial drag on organic revenue growth. Nancy, you've announced the disposal of the regulatory reporting segment. What is the rationale for keeping building solutions and mortgage documentation and the other banking products you still have, please? Secondly, print is much less of a drag than it was 10 or 15 years ago. But it's still a headwind, and it's still the topic of questions on this call. As you certainly saw, RELX recently announced its intention to accelerate the exit from print through outsourcing or JV deals, RELX no longer includes print in its organic revenue growth. Will you do the same? And lastly, CCH Tagetik has slowed down from the run rate of double-digit growth historically to 5% now. Is this the new growth rate for this product? Is the slowdown only related to the license to cloud transition? Or is there a competitive element to point out also on Tagetik?
Nancy McKinstry: Okay. So Kevin, why don't you do print and I'll cover the other two. So why don't you go ahead and start on the question of print and organic growth? Yes.
Kevin B. Entricken: Certainly, Sami, as you pointed out, print has become much less of a drag on the portfolio. It's around 5% or less than the total portfolio. We were actually surprised to see the change in RELX's organic growth calculations, our organic growth calculation has not changed. But I can tell you, if I do the back of the envelope math very quickly, if we were to remove print from our organic growth calculation, that would be worth about 50 basis points in both this year and the prior year.
Nancy McKinstry: In terms of the organic growth?
Kevin B. Entricken: Organic growth.
Nancy McKinstry: Yes. Yes. So we'll look at Sami, whether what we do in the future. I think that's a topic to come. And then on FCC and the disposal of -- or the announcement of the disposal of FRR, very different businesses that make up the financial services portfolio. If you look at what remains in the business, we have very strong positions in the U.S. in the community bank market, in particular, in the software businesses or in the software that underpins lending and deposit taking for banks, a very strong position in lean. So these are great businesses that we will continue to invest in. What you see, of course, is that with interest rates remaining relatively high that, that has dampened the transaction volumes for both lean and for mortgages, but that is a cycle, and we fully expect that it will change over time. So we remain committed to the businesses that we have in the financial services portfolio and feel very good about the long-term prospects of those individual units. And then CCH Tagetik, what you see is, again, we remain very bullish on this segment. The market continues to grow well for corporate performance management. We continue to be rated extremely high by any third-party analysts who covers the segment. So what you're seeing in the growth rate is really this transition from license to SaaS. Long term, it's a positive in terms of the quality of the revenues. But in the short term, you have this lumpy effect. We do think that as we look to '26 and '27, that, that will abate as more and more customers are choosing the SaaS product line. Hopefully, that addresses.
Sami Kassab: Just to confirm, Kevin, the print impact you talked about, was that 50 or 15 bps in organic revenue growth?
Kevin B. Entricken: 5-0. 50 bps. So for the half year if you exclude it, it would be about 50 bps.
Operator: We will now take the next question from the line of Robert Vink from Kepler Cheuvreux.
Robert Vink: Yes, 2 questions from my side. The first question is, last year, you launched UpToDate Enterprise Edition, which adds data analytics and AI enhanced search to UpToDate. That, clearly, these types of features are also relevant for workflows in the health care sector. I would be interested to get a little bit more insight on the early usage trends and the customer feedback that you're seeing from this enterprise solution and maybe what do you expect from the solution over time? And my second question is about Brightflag. You acquired Brightflag in June this year, which is present in enterprise legal management. It's clearly an asset which is growing well and mainly has recurring revenues, which I think is interesting because your existing enterprise legal management solutions actually mainly have nonrecurring revenues and the main growth driver for these solutions was also nonrecurring revenues. So I understand what you're saying is that this acquisition is complementary with more mid-market exposure and also in terms of regions. But it does appear that also Brightflag's pricing model might be a bit different or at least the revenue mix is a bit different. Yes, so I would be interested to get a little bit more elaboration on that.
Nancy McKinstry: Yes. So let me cover these. So in terms of UpToDate Enterprise that has been very well received by customers. It does a couple of things. It adds a lot of GenAI features, which makes the ability for the health care provider, whether it's a doctor or a nurse to get to their answer very quickly and that speeds up the whole patient encounter. So we've heard from doctors if they can even save 1 or 2 minutes of time, it's for them a very big positive. So the Enterprise version helps them speed their work and therefore, gives them productivity benefits. It also incorporates some of the drug information in different ways. So again, improves that ability to get to the right dosage as they make prescribing decisions. And then finally, this analytical layer has been useful, not really a bit for the clinician, but really for the CFO and the CEO and the Chief Medical Officer in the hospital because they can see how clinicians are using it across the different departments of the hospital and understand if there is things that they want to take action on, they can do that. So we're rolling that out. We're adding even more features as we talked about. We've also created two partnerships now in the ambient space. So we're embedding the up-to-date content even more and more into the workflow of the physicians. So we're very excited about the customer reaction and excited about where we can take the product. And then on Brightflag, yes, there are some differences between the enterprise legal management business. One is that we sell in the enterprise legal management business. We sell both an on-premise version or sort of a cloud version and then we sell a pure cloud version. That's sort of the upper end of the large corporate market. It's a more mature market. So a lot of the growth that we get in ELM comes from upselling. We have our legal bill analyzer product line. We have more recently a legal collaborator product line. So we upsell a lot there versus adding new logos because the market is more mature. And then the second thing is we do get transactional fees from the law firms as their matters flow through the software that underpins. Brightflag, very different scenario. Total cost of ownership is lower because it's going after the mid-market solution. They don't have other products yet. That's one of the opportunities for us is to cross-sell some of the things we have in ELM to their customer base, and they don't have the recurring -- or sorry, the nonrecurring elements with the law firms. So that's the difference in the models. But it's mostly about serving a very different segment with different needs, and that segment of the market is growing more quickly.
Operator: We will now take the next question from the line of Lisa Yang from Goldman Sachs.
Lisa Yang: Yes, I have a few more questions left. The first one is, if you can comment across the portfolio, whether you've seen any changes in cost of behavior with new sales, renewals given the macro and tariff uncertainty, especially in the most recent months? For instance, I saw that in FCC, you changed the wording a bit, you expect to be below versus slightly below. So in FCC in particular, like are we seeing maybe a deterioration in the exit rate in Q2. That's the first one. The second question is on AI. I mean you laid out earlier in your presentation, all the new features you've rolled out. It looks like the progress is very encouraging. Do you think you're able to quantify the benefit you're seeing so far in terms of maybe roughly uptick per customer, able to raise prices more or even seeing great operating leverage. So are you able to give us any sort of quantification so far? And which division are you basically seeing the most benefit at this point? The last question is just on current M&A. Obviously, M&A spend increased a lot, I think almost EUR 1 billion spend over the last 12 months. Does this see a potential change in your strategy? Do you expect M&A spend to remain elevated going forward? What does that mean for the buyback? And is it possible to also get a sense of how like the 3 big acquisitions, Isabel, RASi, and Brightflag, what's the growth rate of these businesses and just to get a sense of the organic growth accretion once this get into the organic calculation?
Nancy McKinstry: So Kevin, do you want to take the M&A question, and then I'll talk about AI and trading.
Kevin B. Entricken: Yes, I would say on M&A and capital allocation, in particular, nothing has changed in our philosophy. We continue to have the same three priorities for allocating capital, investments in the business, both organic and through smaller bolt-on M&A, paying down debt and rewarding our shareholders. We do have a progressive dividend program, but a share buyback has been an important component of that capital allocation and it will remain so going forward. So we do expect to continue with the M&A -- I'm sorry, the share buyback program that we have this year. And we will continue to evaluate that for future years.
Nancy McKinstry: And on the trading conditions, we haven't seen any material changes in our pipelines or in our conversion rates on new sales across the portfolio. We continue to see positive renewals. I would say that the transaction volumes, so you can see that has turned negative in several places across the portfolio. I think that reflects the economic uncertainty as well as subdued M&A volumes and lending volumes quite significantly, both in mortgage and nonmortgage asset classes. And so certainly, that is where you see, I think the impact of the economic cycle is more on the transaction, nonrecurring line than in the core recurring business and our recurring revenues grew 7% through the first half. So I think that speaks to the both the quality of the renewal process that we're underway as well as new sales. And then in terms of AI and sort of the monetization of that. Clearly, we've been at AI for over 10 years. The vast majority of our digital products are touched by AI in some way. And as we noted, a lot of introduction around GenAI features and very recently sort of the Agentic technology. So we fully expect that we will, over time, be able to quantify that for you. I would say it's early days right now in terms of doing that. We do see that the introduction of these enhancements and new products supports retention, supports price increases. But in terms of being able to say, here's exactly how much is coming from the AI components, we're still working through that as we launch newer products into the marketplace.
Lisa Yang: And just on the growth rate of the three acquisitions you did, any color?
Nancy McKinstry: Yes, yes. So yes. So we don't disclose that, but I would say that all three of them, meaning the Isabel Group, the RASi and Brightflag are growing more than the core, right? That's so higher growth than the core and leave it there.
Operator: We currently have no questions coming through. [Operator Instructions] There are no questions, so I will hand you back to your host to conclude today's conference.
Nancy McKinstry: Thank you very much. We -- on behalf of Meg, Kevin and myself, we want to thank you for your participation and wish you a good rest of your day.
Operator: Thank you for joining today's call. You may now disconnect.