Wolters Kluwer NV (OTCPK:WOLTF) Q2 2022 Earnings Conference Call August 3, 2022 7:00 AM ET
Company Participants
Margaret Geldens – VP, IR
Nancy McKinstry – CEO & Chairman
Kevin Entricken – CFO
Conference Call Participants
Nick Dempsey – Barclays Bank
Matti Littunen – Sanford C. Bernstein & Co.
Matthew Walker – Crédit Suisse
Lisa Yang – Goldman Sachs Group
Henk Slotboom – IDEA!
Sami Kassab – BNP Paribas Exane
Sarah Simon – Berenberg
Operator
Good day, and thank you for standing by. Welcome to the Wolters Kluwer Half Year 2022 Results Webcast and Conference Call. [Operator Instructions]. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your host, Meg Geldens, Vice President, Investor Relations, to begin today’s conference. Please go ahead.
Margaret Geldens
Thank you, Sandra. Hello, everyone, and welcome to the Wolters Kluwer Half Year 2022 Results Call. Today’s results release and the slides for this presentation are available for download from the Investors section of our website, wolterskluwer.com.
On the call today are Nancy McKinstry, our CEO; and Kevin Entricken, our CFO. We’re all dialing in remotely from various locations. So thank you in advance for your understanding in case we experience any delays. Nancy and Kevin will shortly discuss the important features of our half year results. Following their comments, we’ll open the call to your questions.
Before we start, I’ll remind you that some statements we make today may be forward-looking. We caution that these statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the statements. Factors that could affect Wolters Kluwer future financial results are discussed in Note 2 of today’s release and in our 2021 annual report.
As usual, in the presentation today, we will refer to adjusted profits, which exclude nonbenchmark items. We also refer to growth in constant currencies, which excludes the effect of currency movements. And we refer to organic growth, which excludes both the effect of currency and the effect of acquisitions and disposals. Reconciliations to IFRS and further information can be found in Note 4 of today’s release.
At this time, I’d like to hand the call over to our CEO, Nancy McKinstry.
Nancy McKinstry
Thank you, Meg. Hello, everyone, and thank you for joining us on this call. In keeping with our usual practice, I will start by giving you a brief summary of our first half achievements, and Kevin will then take you through the financial results in detail. After that, I will come back to discuss divisional developments, review our recently launched 3-year plan with some examples and finish off with an outlook for the remainder of the year.
So let’s start with our achievements on Slide 4. I’m pleased to report that we had a good start to the year with a strong performance across all 4 divisions. We delivered 7% organic growth and saw a significant increase in the adjusted operating profit margin, which reached 28.2%. This drove an 11% increase in diluted adjusted EPS in constant currency.
Adjusted free cash flow was down slightly in constant currencies, but this was entirely as expected and partly due to timing. Return on invested capital increased to 14.8%. Our balance sheet remains strong, allowing us to increase cash returns to shareholders. We also made progress on our new strategic plan, including several ESG areas, expert solutions, which are products that deliver a combination of expert content and workflow automation to drive improved outcomes and productivity performed very well, up 9% organically.
A growing proportion of these solutions are cloud-based software, which grew 20% organically. We increased product development spending to 10% of total revenues and have this year been rolling out several exciting AI-based product enhancements. Our HR teams around the world have been very active in their efforts to attract and retain talent while advancing employee belonging and diversity.
Last but not least, we have, in recent months, developed a road map to start aligning with the TCFD and they’ve made progress in assessing our global carbon footprint. Now let me hand it back to Kevin, who will take you through the financials.
Kevin Entricken
Thank you, Nancy. Let’s start with the financial highlights on Slide 6. First half revenues were €2,600 million, an increase of 7% in constant currencies. Organic revenue growth was 7%, marking an improvement on the prior year and better than we had expected. Adjusted operating profit was €734 million, an increase of 10% in constant currencies.
The adjusted operating profit margin improved by 130 basis points to 28.2%. This increase reflects strong operational gearing and favorable currency mix. Diluted adjusted earnings per share increased 11% in constant currencies. Diluted adjusted earnings per share in reported currencies benefited by the stronger U.S. dollar and increased 23%.
Adjusted free cash flow was €497 million, a decrease of 4% in constant currencies, reflecting lower cash conversion and a higher cash taxes paid as we expected and some unfavorable timing. We continue to and expect an increase in adjusted free cash flow for the full year. Lastly, net debt-to-EBITDA was 1.3x, lower than a year ago.
Now let’s take a brief look at the divisions on Slide 7. All 4 divisions delivered strong organic growth. Health grew 6% organically, slowing from 8% a year ago, as expected. Clinical Solutions saw an acceleration in organic growth, but Health Learning, Research & Practice decelerated against a challenging comparable caused by last year’s addition of the ASCO publishing contract.
Tax & Accounting reported 9% organic growth compared to 6% a year ago. This strong performance was driven by software and benefited from a number of timing and nonrecurring factors. Governance, Risk & Compliance reported 6% organic growth, accelerating from 2% a year ago. The pickup was driven by Financial Services, which grew 7% compared to a 6% decline a year ago. Finally, Legal & Regulatory delivered 6% organic growth versus 4% a year ago. EHS/ORM saw a significant improvement in growth driven by license fees and implementation services for the Enablon software platform.
Let’s move to Slide 8, which will show our revenues by type. The chart on the left of this slide shows organic growth for our recurring revenues, which make up 81% of the total. On the right, you see organic growth for our nonrecurring revenues, which make up the remainder. Of the recurring revenues, digital and subscription — digital and service subscriptions, shown in blue, make up 73% of group revenues. This important revenue source grew 8% organically, sustaining the strong momentum we saw in the second half of last year.
Looking at our nonrecurring revenue streams on the right. In total, these grew 6% organically, but the trends were mixed. The largest component, other nonrecurring revenues is primarily software license fees and related implementation services. Here, you’ll see a very nice recovery of 8% organic growth in the first half. In contrast, you’ll see a sharp deceleration in organic growth in Legal Services transaction revenues in our GRC division. It was 3% in the first half compared to 18% a year ago.
GRC Financial Service transactions, excluding revenues associated with the PPP program, grew 14% organically compared to 6% a year ago. Including the PPP program revenues, this revenue declined 2% compared to a 20% decline a year ago.
Let’s turn to division margins on Slide 9. The adjusted operating profit margin increased by 130 basis points to 28.2%. This margin increase was driven by strong operational gearing and favorable currency mix. The margin development was better than we had expected, mainly due to the stronger-than-expected organic growth, the recent and rapid appreciation of the U.S. dollar and the slower-than-planned ramp-up in spending and hire.
Now let’s take a look at the rest of the income statement on Slide 10. Adjusted net financing costs were €42 million. This includes a €13 million net foreign exchange loss related to the translation of intercompany balances. We had a similar loss a year ago. The benchmark tax rate on adjusted pretax profit increased by 30 basis points to 23.8%. As a reminder, for the full year, you will see a more significant change as last year’s full year benchmark tax rate of 21.5% was reduced by a onetime release of tax contingencies following the successful closure of tax audits.
Adjusted net profit after tax was €527 million, up 10% in constant currencies. And lastly, diluted adjusted earnings per share increased 11% in constant currencies to €2.04, reflecting the increase in adjusted net profit and lower weighted average shares outstanding.
Now let’s take a look at cash flow on Slide 11. As expected, our cash conversion ratio returned to a more normal level in the first half, 96% versus 107% in the prior year. This was due to lower working capital inflows largely as expected and partially a matter of timing. In addition, CapEx increased to €139 million, an increase of 23% in constant currencies, reflecting increased investment in product development.
Interest paid was €42 million, similar to a year ago. Cash taxes increased by €48 million as expected to €175 million. Summing this up, adjusted free cash flow was €497 million, down 4% in constant currencies.
Now a few comments on how we deployed the cash flow on Slide 12. Dividends paid to shareholders amounted to €264 million. We spent €71 million in acquisitions, largely related to the acquisition of IDS and Governance, Risk & Compliance in April. Cash deployed for share buybacks in the first 6 months totaled €302 million. We ended the first half with a slight increase in net debt compared to year-end 2021. Nonetheless, our balance sheet remains in very good condition with a leverage ratio of 1.3x.
I’d now like to discuss the dividend and the 2022 share buyback program. Let’s turn to Slide 13. As is our rule, the interim dividend for 2022 was set at 40% of the prior year total dividend. This means we will pay out a €0.63 per share to shareholders in September. Earlier this year, we announced a share buyback program of €600 million. Today, we’re announcing an increase to this program of €400 million, which will bring the total buyback to €1 billion this year.
Given our performance and the state of our balance sheet, we believe this level of share buybacks leaves us with ample headroom to support our dividend plans, to sustain investment and to make selective acquisitions. As of August 2, we have spent €356 million on share repurchases, so we have completed over 1/3. We now have signed mandates to complete the remaining €644 million in buybacks in the next 5 months.
So let me sum up before I hand back to Nancy. Moving on to Slide 14. We’re very pleased with the strong performance in the first half. Organic growth was 7%, with expert solutions up 9%. The strong organic growth, operational gearing and favorable currency mix helped drive the first half margin up by 130 basis points. Adjusted earnings per share increased to 11% in constant currencies, reflecting the strong operating results and lower share count.
Adjusted free cash flow in constant currencies declined slightly as expected as we returned to historical cash conversion rate and absorb higher cash tax payments. Our return on invested capital improved to 14.8%. With our balance sheet remaining in a very strong condition, we have increased this year’s share buyback program to a total of €1 billion.
I’ll now hand it back to Nancy to cover divisional developments.
Nancy McKinstry
Thank you, Kevin. I’ll start with a review of the half year performance of our 4 divisions. Let’s begin with Health on Slide 16.
Health achieved 6% organic growth slower than a year ago due to the large contribution from last year’s ASCO publishing contract win. The adjusted operating profit margin increased, mainly reflecting operational gearing and the ongoing mix shift from clinical solutions. Clinical Solutions delivered 8% organic growth, led by UpToDate and our Drug Information Solutions, which saw good renewals and new customer wins. Emmi, our patient engagement solution, also posted high single-digit organic growth, largely driven by new customer wins and upselling.
Learning, Research & Practice recorded 4% organic growth, down from 11% a year ago. In medical research, Ovid achieved good organic growth driven by subscription renewals and product innovation. In the learning practice arena, we saw continued strong growth in digital learning solutions for nurses. Print books and Health increased 42% organically, better than we expected, largely driven by restocking and timing of orders.
Now let’s move to Slide 17 to talk about Tax & Accounting. In Tax & Accounting, organic growth was 9%, supported by software growth and a few nonrecurring factors. The adjusted operating profit increased, reflecting operational gearing, partly offset by increased investment. Corporate performance posted strong organic growth of 9%, led by CCH Tagetik, which sustained double-digit organic growth.
Note that we’ve brought our U.S. corporate tax unit together with CCH Tagetik and Vanguard to develop synergies in the North American market. Our professional tax and accounting businesses taken together recorded 9% organic growth. North America benefited from favorable timing and nonrecurring items, but nevertheless, saw very strong accelerated growth in cloud-based revenues driven by renewals and upselling of new modules. Engagement, our external audit solution, also performed very strongly.
Europe saw good organic growth across all countries, driven by recurring software maintenance and cloud subscriptions. Here, we continue to build out our cloud and hybrid cloud solutions for European tax professionals.
Turning to Slide 18. Governance, Risk & Compliance recorded 6% organic growth. The adjusted operating profit margin was broadly stable as operational gearing was offset by higher investment. Legal Services grew 6% organically. CT Corporation recorded good, but slower organic growth with transactional volumes facing a challenging comparable.
Enterprise Legal Management posted significantly improved organic growth driven by higher nonrecurring fees. Financial Services achieved 7% organic growth, up from a decline of 6% last year. Compliance Solutions recorded 4% organic growth, led in part by strong performance in the eOriginal business. Lean Solutions, which is now part of our Corporate Solutions unit, enjoyed 19% organic growth. And Finance, Risk & Reporting, which supports banks with regulatory reporting and risk solutions, posted robust organic growth compared to a modest decline last year. This performance was mainly driven by an increase in professional services.
Now let’s turn to Legal & Regulatory on Slide 19. Legal & Regulatory revenues grew 6% organically. Adjusted operating profit increased largely due to operational gearing and underlying cost savings. EHS/ORM and legal software delivered 20% organic growth compared to 4% a year ago. This acceleration was driven by Enablon, which had a strong first half in on-premise software and implementation fees.
Legal software tools, namely Kleos and Legisway, delivered steady double-digit organic growth. Legal & Regulatory Information Solutions recorded 3% organic growth, driven by growth in its digital information products, which were up 7%. Print revenues, which now make up 21% of the unit’s revenues returned to historical rates of decline.
Now I’d like to update you on the early progress we’ve made on our recently launched 3 years strategic plan with some examples. So let’s move to Slide 20. At the start of this year, we kicked off our new 3-year strategy, which consists of 3 priorities: First, we intend to accelerate our expert solutions. We plan to focus our investments on expert solutions as cloud-based products and on transforming selected information products and services into expert solutions, which deliver higher value to our customers.
Our second priority is to expand our reach. We will extend into high-growth adjacencies along customer workflows, and adapt products for new segments. We will continue developing partnerships and ecosystems for our key software platforms. And thirdly, we intend to evolve our core capabilities. We intend to strengthen certain central functions, mainly in sales and marketing and in technology, to meet the operating requirements that come with the shift to expert solutions.
We also intend to advance our ESG performance and capabilities in the areas that are most relevant and material to our business. Let me highlight some examples that demonstrate how we’re putting this strategy into practice.
Turning to Slide 21. Many of you have seen this slide before. This shows our total software revenues in the proportion that is cloud or SaaS subscription revenue. First half of this year, total software revenues grew 9% organically to reach €1.1 billion or 44% of group revenues. Our top software products are listed on the right. Nearly all of these software products are available either as on-premise solutions or cloud-based applications.
Cloud software products now represent over 1/3 of the total software revenues and grew 20% organically. We expect the transition to cloud to continue steadily in the coming years as these platforms offer significantly more benefits to our customers. We will continue to invest heavily in cloud to drive growth.
Now let me update you on one of our biggest and most successful cloud solutions on the next slide. As many of you know, CCH Axcess is our award-winning cloud-based tax preparation, compliance and workflow management platform. It is, today, still the only comprehensive and integrated cloud-based suite available in the U.S. market. As a single unified platform, it brings customer benefits such as increased productivity, improved accuracy and greater insights. We felt it was worth updating you on how much this solution has progressed over the past few years. We’ve been investing continually to advance functionality, adding several new modules in the past year. We launched with 6 modules 10 years ago, but today, customers can subscribe to 13 modules, all easily accessed through the integrated dashboard. Two of our newest additions are CCH Axcess Validate and CCH Axcess Marketplace.
CCH Validate is exciting because it relies on patented technology that leverages blockchain to help CPA firm auditors fast-track banking confirmations. With this solution, the authorization part of the audit process is reduced to just a few clicks, taking 5 minutes or less. This compares to hours, sometimes days using the traditional methods.
In 2021, we released CCH Marketplace. The CCH Axcess open APIs allow for easy technology integration into the platform for clients’ own internal data and third-party solutions for online payments, staff scheduling and cryptocurrency management. In the first half of 2022, CCH Axcess delivered double-digit organic growth in revenues as U.S. CPA firms migrated to the cloud with Wolters Kluwer. We expect revenues for this cloud platform to overtake those of the on-premise version in early 2023, which will be a very important milestone.
Let’s turn to the next slide. Product innovation is fundamental to our business and has been a core part of our strategy for almost 2 decades. Our consistent approach to product investment, even throughout the pandemic, has led to a [indiscernible] of exciting enhancements that are currently being rolled out in the market. Many of these enhancements are based on advanced technologies, including machine learning, blockchain, robotic process automation and even virtual reality.
Let me highlight 2 examples. One is the new vSim for nursing. This provides new content for advanced medical, surgical and critical care and uses highly realistic scenarios in a virtual simulation to develop students’ critical judgment skills for these situations. The new version adds very lifelike patient graphics and an updated dialogue feature to practice active listening skills. These advancements give students an even more realistic simulation of the clinical experience and prepares them for practice.
Another example is our OneSumX Proviso product recently released by GRC. This solution applies robotic process automation and natural language processing to our deep expert content to help financial institutions more effectively manage regulatory change. I am delighted by the number of new ideas that our teams are coming up with as part of this year’s Global Innovation Awards program. The majority of these ideas incorporate some form of AI technology. This bodes well for our innovation pipeline and illustrates the strength of our employee engagement.
Now let me wrap up with an outlook for the remainder of 2022. As indicated in today’s release, we have updated our outlook for 2022. We are modestly more optimistic about organic growth this year, notably in Tax & Accounting, and Legal & Regulatory. But we do still expect organic momentum to slow in the second half. We are raising our guidance for adjusted operating profit margin to 26% to 26.5%. We are raising our guidance for full year diluted adjusted EPS in constant currencies to mid- to high single-digit growth.
Along with that, we’ve increased our guidance for ROIC and reported currencies to 14% to 15%. We are reaffirming our guidance for adjusted free cash flow in constant currencies as this figure has been broadly in line with our expectations so far this year.
So now let me finish up with outlooks by division. In Health, we continue to expect full year organic growth to slow from 2021 levels, mainly due to the absence of a contract win, the size of the ASCO titles. Adjusted operating profit margin is expected to improve year-on-year. In Tax & Accounting, we expect organic growth to accelerate from 2021 levels and the adjusted operating profit margin to improve.
In GRC, we continue to expect organic growth to slow from 2021 levels mainly due to an expected decline in transactional revenues in the second half. The adjusted operating profit margin is expected to improve. And finally, in Legal & Regulatory, we now expect organic growth to improve on 2021 levels. The adjusted operating profit margin is expected to decline modestly due to the absence of the one-off pension amendment recorded last year.
So thank you very much for your attention. Operator, we can now turn to questions.
Question-and-Answer Session
Operator
[Operator Instructions]. We will now take the first question. And the first question comes from the line of Nick Dempsey from Barclays.
Nick Dempsey
I’ve got three questions, please. So the first one, when I look at the organic growth of Wolters Kluwer RELX, Thomson Reuters all improving in an inflationary environment, do you think inflation is helping your ability to persuade the same customers to pay more when it comes to a renewal even if you’re not officially pushing through a kind of list price increase?
Second question, over time, you’ve rarely seen an improvement in organic growth in 1 year, but then a dip back to a lower growth level the following year, almost never. So you’re pushing up your comments on organic growth for this year without actually putting a figure on that. Are you confident that you can maintain that higher level of growth in the years beyond 2022, assuming no macro weakness?
And the third question, in terms of just second half progress in GRC, you pointed to some difficult comps there. You did do 11% organic growth in the second half ’21, but wasn’t that only high because of the really easy comp in the second half of 2020? So should you really be seeing a tough comp effect in second half ’22 in GRC?
Nancy McKinstry
Thanks, Nick. I’ll take the first 2 and then ask Kevin to comment on the transactional trends we’re seeing in GRC. So if you look — so the question about inflation and pricing, if you look at the 7% organic growth and look at the components, the largest share of that is coming from new selling and upselling as well as higher retention. And then, of course, price — we do have price increases that affect the recurring part of our business. We price to value. We have been investing, as you know, Nick, heavily in product enhancements, et cetera.
So that when we go out to renew, the customers can see the increase of the value, and that is correlated with the price increases that we get. So the 7% is largely new and upselling improved retention and then, of course, the transaction revenues and then price kind of filters through that. The question around is the maintenance of higher levels of growth, I think that I would point to 2 things — 2 metrics that we look at consistently: One is the expert solution part of our portfolio. It’s — if you — it’s now 56% of total revenues, grew 9%. And then the second is our digital services and — products and services, which, again, 93% of total and grew 8%. So very good, sustained levels of growth in those areas that we’ve seen over the years that we have been able to achieve, and it speaks to how the strategy is really working to deliver higher levels of growth.
So that’s the plan. We don’t give growth guidance, so we’re not suggesting that the absolute numbers remain at that level, but the notion that we’re getting to sort of year-on-year higher levels of organic growth performance is really driven to this strategic mix shift that we’re seeing as we continue to transform the business. Kevin, do you want to talk about transactions in GRC?
Kevin Entricken
Yes, happy to. in GRC, we did have a very strong second half last year, which is part of the reason why we are guiding towards some tough comparables as we go into the second half this year. Transactions held up quite well in the first half of the year, maybe a little bit better than we originally expected, but we did see a slowdown in those transactions in the last couple of months of the second quarter. So as we move into some uncertain times with regard to the economic drop back, we do expect transaction revenues to come under pressure as they typically do when we face an economic situation, which is weakening.
Nick Dempsey
Right. Just to jump in there, Kevin. So the last 2 months of the quarter — or the last couple of months of Q2, do you think that, that slowdown is macro related? Or could there be other not a complex set of transactions? Could there be other things at play for that slowdown?
Kevin Entricken
Well, as we noted in our comments, the transaction revenue performance was mixed overall. We did see some slowdown in mortgage transactions, but we did see growth in corporate lending transactions. But overall, when we look at all of them together, legal transaction revenue as well as financial transactions revenue, the indicators are pointing to a slowdown and that is, in fact, tied to the economic circumstances that we’ll be going into.
Operator
We will now take the next question, please stand by. And the next question comes from the line of Matti Littunen from Bernstein.
Matti Littunen
First question on cloud organic growth. It looks like it’s accelerated from last year’s number against a bigger base. So could you just share whether the underlying growth drivers there are the same as you just went through for the other subscriptions, namely upselling the primary driver? Or are there any other components that are different for cloud?
Second question on Legal & Regulatory. Now you’ve had some product reshuffling in that division. You’ve had the name change of Cheetah to VitalLaw. Could you give us a bit of an update on was this more than a rebranding? And how do you see the competitive landscape for that VitalLaw product?
And then last question, it looks like a big improvement in Emmi’s growth rate. I remember you’re saying before that Emmi was maybe suffering a little bit from the U.S. health care market not developing the way you are hoping for — but has that changed? Or are there other drivers behind that sort of improvement there?
Nancy McKinstry
Okay. In terms of cloud organic growth, the drivers there, it is primarily new sales. We are scaling many of our solutions like Enablon, Tagetik, et cetera, upselling. So it’s kind of this land and expand strategy where a client buys 1 module and then we upsell them the whole suite and all of these solutions have multiple modules. I use the example of CCH Axcess now has 13. Enablon has something like 10 or 12 as well. So that upselling component is very much a driver of growth. And then continuing to expand the new products. So offering things like Validate, some other things I highlighted in the presentation, are a portion of the growth, but the largest growth comes from new sales and upselling for cloud.
On the L&R, VitalLaw, this is an example of transforming our information products into higher-value expert solutions. So it’s more than just a rebranding. We did the same thing in the Netherlands where the product was previously called Navigator. We launched something called InView. These products tend to have more advanced technology functionality, whether it’s predictive analytics or AI. So the products are different as we advance them. In the U.S., though we are still a specialty player compared to Westlaw and Lexis Nexus, that has not changed. But within the specialties, where we lead, we are improving the offering through VitalLaw. And then on Emmi, Emmi is growing well in 2022, that is largely a result of a lot of the changes we’ve made in both product enhancements and different kinds of products that speak to that market around both patient education and patient engagement and improved cross-selling. So it’s not so much that the market has changed at all for these solutions. It’s more about what we’ve been doing to our product offering.
Operator
We will now take the next question. And the next question comes from the line of Matthew Walker from Credit Suisse.
Matthew Walker
Can you hear me okay?
Kevin Entricken
Yes, we can hear you.
Matthew Walker
I’ve just got two questions. So the first is could we take it that the €1 billion buyback level is an appropriate level for the following years? Or is there anything unusual about this year that would make it drop down for next year and the years beyond that? And then on the margin increase in the first half, how much of it came from the less hiring and how much came from other factors like FX and operational gearing? If you could just pass it out, that would be helpful.
Nancy McKinstry
Kevin, do you want to take both of those?
Kevin Entricken
Sure. I would say — let me start with the margin first. With the increase of the 130 basis points on the margin, approximately 40 basis points came from the strengthening of the U.S. dollar, Matthew. With regard to the remainder of it, certainly, the good performance in organic growth is flowing through to the bottom line in a meaningful way as well as cost savings programs are also underway to help us mitigate increases in costs and inflation. And as we have mentioned, the hiring has also been a challenge for everybody in the world right now, Wolters Kluwer as well. So it’s taking longer to fill some open positions and the knock-on effect of that is there is a bit of an uplift on the profit. So it is a mix of those with currency being about the 40 basis points [indiscernible].
With regard to share buybacks, obviously, the strength of our balance sheet and the predictability of our free cash flow give us the confidence to raise the share buyback program from €600 million to €1 billion. We do expect to complete that this year, by the end of the year. With regard to what may or may not happen for 2023, obviously, we’ll have more to say about that as we deliver full year results. So bring that up again in February.
Operator
We will now take the next question. And the next question comes from the line of Sarah Simon from Berenberg.
Sarah Simon
I just had 1 question, which is about competition for UpToDate. I was reading about a kind of Chinese sponsored diagnostics platform called AskBob. I’m just wondering, clearly, that’s not going to impact your U.S. business today, given you’ve got multiyear contracts and so on. But are you seeing them in any of your pitches internationally? And just generally, can you talk a bit about the competitive environment for UpToDate, please?
Nancy McKinstry
Sure, Sarah. So UpToDate is very unique. And so there is nothing in any market in the world that is truly a comparable product. UpToDate covers 23 to 25 specialty areas with deep experts that work on behalf — only work on behalf of Wolters Kluwer to create the content, and we are, again, adding lots of new functionality and features every year. So I would say truly a unique product. I’ve not, frankly, heard of AskBob in China. So it may be something that’s newly come out. But for anybody to try and catch up with the depth and breadth of what has been created in UpToDate, it would be extremely difficult. And so there are, in some markets like the U.S., there are lower priced products that try and compete, but do not have the level of depth of coverage or the kind of decision-making functionality that we have in UpToDate. So there are a few alternatives, but I would say, again, they really don’t compare. And so customers that select that, it’s really driven by budget considerations and they kind of try and make duo with it, even though it’s not a comparable product.
Operator
[Operator Instructions]. We are now taking the next question. And it’s coming from the line of Sami Kassab from BNP Paribas Exane.
Sami Kassab
My first question would be on renewal rates. Nancy, you referred to higher renewal rates as a driver of higher growth, but you’ve never disclosed that metric. So could you be a bit more specific on renewal rates across divisions and perhaps discuss where they are the lowest and what division has, perhaps, the strongest upside in terms of improving renewal rates?
Secondly, in February, when you guided and provided your initial guidance, you had expected a certain ramp-up in hiring and spending. Today, you are suggesting that this ramp-up was slower than you had expected. What drove that? What made you change your hiring policy? Is it more cautiousness on the macro environment and the transaction revenues? Or is it because you’re struggling to find the available talent at desired salary point? Or is it because the top line is actually growing faster, hence, perhaps you need to spend less on marketing and you need fewer people than you had initially expected? So why the slower ramp-up in hiring and spending?
And lastly, Tax & Accounting. In North America, you had a 10% organic revenue growth, probably a 20-year high or so, but you also had some factors that were one-offs and that contributed to the 10%. So can you discuss whether that, perhaps, 9% is the new medium-term growth rate for the tax division? Or what should we really read through the H1 number? Is it kind of a 7% plus some timing? Or was it an 8% plus 1 point of timing. So can you please help us gauge the impact of one-offs and nonrecurring items in that very strong performance in Tax & Accounting and especially in North America?
Nancy McKinstry
Okay. So Sami, I’ll take the first and the last question and ask Kevin to talk about spending and what drove that. So on renewal rates, the reason we don’t disclose the numbers is, obviously, we have them by product, and we have thousands of products. So — and the average is, frankly, not all that meaningful to anybody. So where we are seeing the improvement on renewal rates, it’s largely in what I would call our Info solution products. And it speaks very much to this — these investments we’ve been making to make these products more expert solution like. We have very high retention rates overall in software. So if they’re sort of inching up, and it’s already at a very high level in the Info products, which typically were maybe sort of mid-80s, we are now seeing those rise to higher levels. And so again, that is helping to lift not only Legal & Regulatory, but some of our performance in Health Learning, Research & Practice where we have a lot of these kinds of products. So that’s on renewal rates.
And then on Tax & Accounting, they did have some recurring revenues. We have a tax transaction business in North America, where we service CPA firms that want to outsource the preparation of some of their tax returns, and that’s part of the transactional part of what we do in North America. So that helped drive the good 10% performance. But with that said, we are seeing very good performance in cloud and in software overall. And so that level of software growth will continue, as we continue to invest both in cloud and also launching some of these new products. And if you look back in time, the software growth in North America has been sort of in that 6%, 7% kind of range. And so — and I think that will continue to be supported again. And again, our goal is always to increase organic growth through, again, these new products that we are driving. And the fact that cloud now has 13 modules and so we really have a very strong environment for upselling. So Kevin, do you want to talk about the ramp-up of spending?
Kevin Entricken
Sure. On spending, I would say, our hiring, we are finding that just filling positions is taking a little bit longer than we originally expected. This is a metric that Nancy and I review with the divisions on a monthly basis and with our HR team. We’ve made significant investments in our recruiting program, our recruiting team as well as investments in Wolters Kluwer in general. I mean, we’ve got very high engagement scores. We’re investing to make sure that we continue to have high engagement scores as well as investments in diversity, equity inclusion program. So I think we’re doing all the right things. But as you’re probably hearing from other companies as well, it is a tight labor market and we’re competing. I think we’re successful, but it is taking just a little bit longer than we originally thought.
Nancy McKinstry
And then I think the other category, just real quick to chime in, is travel. We expected travel to come back more than it has. And so that’s also, again, an area of cost that is ramping more slowly.
Operator
We will now take the next question. And the next question comes from the line of Lisa Yang from Goldman Sachs.
Lisa Yang
A few clarification points on the margin. So you mentioned in H1, the FX benefit on margin was 40 basis points. Could you maybe share us how much you’re baking in your guidance for the full year, so the [indiscernible] how are you baking any FX benefit there? That’s the first question. The second question still relates on the margin. You’re obviously giving a range of margin outcome for the year, which actually implies quite a lot of big branch in H2, I think anywhere from something like 20 bps increase to more than 100 bps of increase in the second half. So could you just maybe help us understand like what’s driving that range, especially in the second half? Which divisions are you expecting to see maybe a greater range of outcomes? Or you maybe baking in, again, the range of assumptions on the hiring or investments? So any color, I think, on that would be helpful.
I had a third question, and sorry if it’s highly theoretical. But just thinking about the security of businesses, and clearly, Wolters Kluwer is very busy. And I think the transaction maybe a bit more [indiscernible], but I’m just wondering if you go through the main divisions, which areas would you expect to see most at risk? You mentioned transaction, but I’m just wondering whether there are any other end markets, any regions where you would expect to see a more meaningful slowdown into next year as the macro gets into negative growth. And would 2020, for instance, be a good sort of proxy in terms of whether what’s the scenario could be for Wolters?
Nancy McKinstry
Yes. So Kevin, do you want to take the margin questions and then maybe I’ll start on the economic resiliency question, and then you can add your comments as well. But…
Kevin Entricken
Sure. I would say on the margin question with regard to guidance and what our view is on FX. Obviously, we don’t predict what the FX will do moving forward. So we’re kind of taking a spot rate assumption. Obviously, if the dollar were to strengthen or to weaken, that would play into it, but we are confident in the guidance upgrade that we’ve given you today. So we think that’s the right place for you to be. And as far as the margin range is concerned, I do expect in the second half — certainly, I do expect to fill positions at a greater rate. We’ve worked hard on that and made some investments there. So I do expect that we will see fewer open positions as we get to year-end. Other investments that we will be making will continue to invest in product innovation, but also some projects that we’re working on around the organization, and we will continue some operational efficiency projects. We’re also investing in some HR projects, and we’ve got some outside help to help us with some of our ESG work that we are doing. So we do expect costs to increase in the second half of the year.
Nancy McKinstry
And then on the resiliency question, my — I don’t think 2020 is the right year to look at because the pandemic had such a, in some ways, strange effect on the business. But if you go back in time to the global financial crisis, I would say a couple of remarks: One is we are more resilient than we were back then. We now have 81% of our total revenues that are recurring. We have a much — we’re virtually a digital business, which, again, is a more resilient business. And I think that the retention — seeing the retention rates continue to improve, I think, speaks well to our positioning. So where would the economy — the economic downturn affect us. It’s clearly in our transactional product lines, primarily in the GRC business, which has got both the financial services transactions and the legal service transactions. It will likely also affect new sales kind of broadly, that’s much harder to predict and then books it generally — also affects books, but that’s a very small part of what we do right now. So I think the resiliency of the company is very strong. And I think if I look across the enterprise, we have — the market positions have never been better in my tenure. And again, that speaks to the focus on expert solutions and the focus on investing in our core products with new enhancements and all of these new technologies that we talked about this morning.
Operator
We will now take the next question, please stand by. And the next question comes through the line of Henk Slotboom from the IDEA!
Henk Slotboom
Congratulations on a set of very decent impressive results. Nancy, I’m looking at Slide 21 here. And it’s obvious that the cloud-based software is outgrowing the rest of the software business. Is it fair to assume that there is a margin difference that the cloud-based software has a higher margin and that the superior growth there will further drive margins going forward?
Nancy McKinstry
Yes. No, not yet. In fact, our on-premise software products have higher margins today. We are still scaling software. The comment on CCH Axcess as Axcess — the cloud version of Axcess becomes bigger than the on-premise version, that’s where the margins cross, meaning that’s where they meet. But today, in fact, we are investing in both platforms, right? We keep our — we call them foundational products these on-premise products healthy. So there’s still some level of investments as we’re clearly investing in the cloud. Cloud is still scaling. So the margins are higher generally on-premise, and it will take some time for us to reach these crossover points, but we have baked all of that into our guidance, and we know when we expect them to cross over and all of that. So we have the analytics behind all of this to have a good sense of how we manage the margins as we’re migrating.
Henk Slotboom
Perhaps a follow-up, if I may. Is there a lot of migration going on from on-premise to cloud? Or are you addressing a new group of clients primarily with the cloud-based software?
Nancy McKinstry
Yes. It’s really more the concept of migration and then upselling, right? Because the benefit in the cloud is significant for our clients. And all of these products, again, have many modules, both on-premise and in cloud. So we get more uptake of clients buying more modules when they migrate to the cloud. That’s one of the reasons why we want them to migrate into cloud. And then when we are first to market, so for example, in North America, where we’ve really been the only player since we launched, there we have actually gained market share. But in many markets, the retention rates of everybody are pretty high. So it’s — the share gains are not the most significant part of what’s growing. It’s really about migrating and then upselling. Now in some of the newer markets, like Tagetik and Enablon, that is all largely new customers, right? But if you look at some of the core Tax & Accounting products, it’s coming from migration and upselling and some new clients in some of the newer products. It’s largely new clients. So it sort of depends on which product line we’re talking about, in terms of how much comes from migration versus new. Yes.
Operator
There are no further questions. So I will hand you back to your host to conclude today’s conference.
Nancy McKinstry
Thank you very much. I want to just say, I really appreciate all your questions and your attention, and wish you all a great rest of your day. Thanks a lot. Bye-bye.
Operator
Thank you for joining today’s call. You may now disconnect.
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