Good day and thank you for standing by. Welcome to this Wolters Kluwer full year 2025 results webcast. My name is Lauren, and I will be your coordinator for today's event. Please note that for the duration of the call, your lines will be on listen only. To ask a question, press star one on your telephone keypad, and you'll be put in a queue until your line is open. Please be advised that today's call is being recorded. I will now hand you over to your host, Meg Geldens, Vice President of Investor Relations, to begin today's call. Please go ahead.
Hello, everyone, and welcome to our full year 2025 results presentation. Today's earnings release and the presentation slides are available on the investor section of our website, wolterskluwer.com. On the call today are Nancy McKinstry, our CEO, Stacey Caywood, our Designated CEO, and Kevin Entricken, our CFO. Nancy, Stacey, and Kevin will present the important aspects of our results. After the presentation, we will take your questions. Before we start, I'll remind you that some statements we make today will 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 these statements. Factors that could affect Wolters Kluwer future financial results are disclosed in note 2 of today's earnings release and in our annual reports. As usual, we refer to adjusted profits, which exclude non-benchmark items.
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 divestments. Reconciliations to IFRS numbers can be found in note 3 of today's release. At this time, I'd like to hand over to our CEO, Nancy McKinstry.
Thank you, Meg. Hello, everyone, thank you for joining today's call. I'll start with a brief introduction summarizing the highlights of 2025. Next, Kevin will take you through the financial results in detail. After that, I'll return to cover the divisional performance, hand off to Stacey, who will provide an update on our strategy and her near-term priorities as she takes over as CEO. She will finish with an outlook for 2026. Let's begin with the highlights on slide four. We delivered another year of good organic growth and an improvement in our adjusted operating profit margin. Recurring revenues, which account for 83% of total revenues, grew 7% organically. We made significant progress in adding important generative and agentic AI capabilities into our integrated productivity platforms, leveraging our trusted proprietary content, our deep domain expertise, and our advanced AI technology.
Today, nearly 70% of our digital revenues are from AI-powered solutions. Among our many innovations last year were UpToDate Expert AI and CCH Axcess Expert AI, which embed our AI technology and provide significant productivity benefits while keeping experts in the loop. Last year's acquisitions, RASi, Brightflag, and Libra, are all performing strongly and are offering new growth opportunities. All in all, it was a good year financially, during which we made significant progress on our AI strategy. I'll now hand to Kevin to cover the financials.
Thank you, Nancy. Let me start with a summary on slide six. Full year 2025 revenues were EUR 6.125 billion, an increase of 7% in constant currencies. Organic growth was 6%, in line with the prior year. Adjusted operating profit was EUR 1.687 billion, up 9% in constant currencies. The adjusted operating profit margin increased 40 basis points to 27.5%, which was at the top end of our guidance range. Diluted adjusted earnings per share increased 9% in constant currencies, in line with our guidance, which we raised in July of 2025. Adjusted free cash flow was EUR 1.348 billion, an increase of 10% in constant currencies. This was above our expectation and reflects strong year-end collections.
We continue to have a robust balance sheet, ending the year with a net debt to EBITDA ratio of 2.0x . Return on invested capital was 18.0%. Let's look at revenues by division on the next slide. Health grew 5% organically, in line with our guidance. Within Health, Clinical Solutions sustained 7% organic growth. Tax & Accounting delivered 7% organic growth in line with the prior year. This was supported by strong double-digit organic growth in cloud solutions in North America and Europe. Financial & Corporate Compliance grew 3% organically. As we had guided, this was slower than the prior year due to a more subdued environment for transactions and the suspended enforcement of the Corporate Transparency Act in the United States.
Legal & R egulatory grew 5% organically in line with the prior year and supported by strong 7% organic growth in digital and service subscriptions in Europe and the United States. Corporate Performance & ESG grew 7% organically ahead of the prior year. This was driven by continued double-digit growth in cloud software solutions. Let's turn to slide eight to review revenues by type. The chart on the left shows our recurring revenue streams, which account for 83% of total revenues, while the chart on the right shows our non-recurring revenues. Let me first address print, which is shown in both charts. Print makes up under 5% of group revenues. The long-term trend is still one of decline. In 2025, the print decline reduced group organic growth by 50 basis points.
The largest and most important component of our revenues, digital and service subscriptions, shown by the blue line, grew 7% organically. It slowed slightly in 2025, due primarily to the slowdown in Financial & Corporate Compliance. Other recurring revenues grew 8% organically, a slight improvement on the prior year. Turning to non-organic revenues, which can be volatile, we experienced an overall decline of 1% last year. FCC transactional revenues, shown in red, were up 2% for the year, driven by improvement in the second half. The backdrop for U.S. M&A and lending volumes remained subdued last year. Legal & Regulatory transactional revenues are volume-linked fees in the ELM Solutions unit. These grew 9% organically in line with the prior year. Other non-recurring revenues, which are mainly on-premise software licenses and implementation services, declined 5% organically.
Our customers are continuing to opt for cloud subscription offerings. Turning to the divisional margins on slide nine. As mentioned earlier, the adjusted operating profit margin increased 40 basis points to 27.5%, reaching the top of our guidance range. Health and Tax & Accounting drove this performance. This reflects operational gearing, the mix shift of revenues, scaling of expert solutions, and operational excellence programs. Investment in product development, including capitalized spend, was broadly stable to last year at 11% of revenues. We are realizing the benefit of internal use of AI and the completion of several large projects. Adjusted operating profit included EUR 37 million of restructuring spend, an increase as compared to the prior year. Moving to the rest of the income statement on slide 10. Adjusted net financing costs increased to EUR 86 million.
This reflects lower interest income on cash balances and higher coupon rates on euro bonds issued in 2025. Adjusted financing costs also included EUR 10 million net foreign exchange gain, mainly related to the currency translation of intercompany balances. The prior year included a EUR 9 million net foreign exchange loss. As a result, adjusted profit before tax increased 7% in constant currencies. The benchmark-affected tax rate increased to 23.6%, reflecting unfavorable movements in our deferred tax positions. In 2026, we are guiding to an effective benchmark tax rate range of 23.5%-24.5%. Adjusted operating profit was EUR 1,225 million, up 6% in constant currencies. Diluted adjusted EPS was EUR 5.29, a 9% increase in constant currencies.
The increases in net financing and tax were offset by a 3% reduction in the weighted average number of shares outstanding. Turning to cash flow on slide 11. Adjusted operating cash flow increased 12% in constant currencies, and the cash conversion ratio was 103%. This was ahead of our expectations due to year-end collections, which were largely timing related. Capital expenditures were EUR 303 million, a slight decrease compared to the prior year, due to the completion of large projects in Financial & Corporate Compliance. Net interest paid, excluding lease interest, increased to EUR 72 million. This reflects the higher coupon interest paid and lower interest income on cash balances. Cash taxes increased to EUR 358 million, reflecting higher income.
All in all, adjusted free cash flow increased 10% in constant currencies to reach over EUR 1.3 billion. Now, let's turn to uses of cash on slide 12. Acquisition spend was EUR 896 million, reflecting the acquisitions of RASi in Financial & Corporate Compliance, and Brightflag and Libra in Legal & Regulatory. All three acquisitions are performing ahead of initial expectations. The divestment of FRR generated cash proceeds of nearly EUR 400 million. Dividends paid increased 8% to EUR 563 million. Cash deployed towards share repurchases amounted to EUR 1.096 billion, as we completed the 2025 buyback and brought forward EUR 100 million from our envisioned 2026 buyback program. Together, dividends and share repurchases totaled EUR 1.7 billion.
We returned more than 120% of our free cash flow to shareholders last year. We ended the year with net debt of just over EUR 4 billion. Our net debt to EBITDA ratio increased to 1.0x , and remains within our targeted range for leverage. We remain in solid financial position, with sufficient room to support our organic investments in the business and make select acquisitions. At the same time, we are committed to our progressive dividend while continuing to execute on share repurchases. Moving to the next slide. We are proposing to increase the total 2025 dividend per share by 8% to EUR 2.52 per share.
This would result in a final dividend of EUR 1.59 per share, to be paid in June of this year, conditional on shareholder approval at our annual general meeting in May. As indicated in our release, we announced our intention to repurchase up to EUR 500 million in shares in 2026. Of this amount, EUR 100 million has already been repurchased in the months of January and February. Starting this Friday through the end of May, we have a third-party mandate in place to repurchase shares for EUR 60 million. Let me sum up results on the next slide. We delivered organic growth of 6%, with recurring revenues up 7%. The adjusted operating profit margin increased 40 basis points to 27.5%. Diluted adjusted EPS increased 9% in constant currencies.
Adjusted free cash flow increased 10% in constant currencies. We remain in a solid financial position, with net debt to EBITDA ratio of 2.0x . Return on invested capital was 18.0%. I'd now like to turn the call back to Nancy.
Thank you, Kevin. I'd now like to begin the divisional review, starting with Health. Health delivered 5% organic growth, led by Clinical Solutions. The adjusted operating margin increased by 180 basis points, reflecting operational gearing, ongoing mix shift, efficiencies, and the absence of prior year write-offs. Clinical Solutions grew 7% organically in line with the prior year. Growth was driven by good renewal rates at UpToDate clinical decision support and drug data solutions globally. Most of our large U.S. institutional customers are now on the UpToDate Enterprise platform, and we are rapidly rolling out our conversational AI interface UpToDate Expert AI. Learning, Research, and Practice delivered 3% organic growth. Excluding print, organic growth would have been 7%. Medical research recorded steady 3% organic growth, while Learning and Practice grew 5%, driven by continued strong growth from our nursing education solutions.
Let's turn to Tax & A ccounting on slide 17. Tax & Accounting delivered 7% organic growth, with continued strong performance across North America and Europe. The adjusted operating margin increased by 200 basis points, driven by operational gearing and cost efficiencies. In North America, revenues grew 8% organically, led by 19% growth in cloud software as customers continued to move to the CCH Axcess platform and adopt more modules. In 2025, we launched several agentic AI modules integrated into the CCH Axcess platform that provide significant productivity benefits to customers. We also made major enhancements to our cloud-based audit suite, CCH Axcess Audit, adding Expert AI capabilities. In Europe, revenues also grew 8% organically, driven by 17% growth in cloud software solutions, with all regions performing well. Moving to the next slide on page 18.
Financial & Corporate Compliance delivered 3% organic growth, led by legal services. The adjusted operating margin was broadly stable, supported by cost efficiencies. Legal services delivered 4% organic growth, driven by 5% growth in recurring service subscriptions. As expected, the slowdown was partly due to the suspension of the Corporate Transparency Act and subdued corporate transactions. Recently acquired RASi performed very well and brings opportunities to grow in the mid-sized U.S. corporate market. Financial services grew 1% organically, supported by a 3% increase in recurring revenues, while lending-related transactional revenues remained subdued. Turning now to Legal & Regulatory on slide 19. Legal & Regulatory delivered 5% organic growth, with strong 8% organic growth in digital and service subscriptions in Europe and in the U.S.
The adjusted operating margin eased slightly due to the absence of last year's one-time pension gain, which was, to a large extent, compensated by strong underlying margin improvement. Legal & Regulatory information solutions grew 5% organically, supported by 8% organic growth in digital and services subscriptions. We continue to enhance our legal research platforms with AI-embedded functionality throughout the year. In November, we acquired Libra Technology and are now integrated the Libra AI Assistant into our trusted proprietary legal content across Europe. Legal & Regulatory software delivered 5% organic growth. ELM Solutions sustained mid-single-digit organic growth, supported by 9% growth in transactional volumes. In June, we acquired Brightflag, a provider of ELM software serving mid-sized and large corporations globally. Brightflag delivered strong revenue growth ahead of expectations. Now let's finish up with Corporate Performance & ESG.
This division delivered 7% organic growth, supported by 18% growth in recurring cloud software revenues. On-premise license fees declined as customers continued to prefer subscription-based cloud solutions. The adjusted operating margin declined, reflecting the decline in licenses and a higher proportion of services provided by third parties. In EHS and ESG, the Enablon suite grew 10% organically, driven by 19% growth in recurring cloud revenues through new customer wins and upsell activity. Within Corporate Performance, CCH Tagetik delivered 5% organic growth, driven by 19% organic growth in recurring cloud revenues as a result of new customer additions and upgrades. Audit and assurance delivered robust organic growth, also driven by recurring cloud revenues. Last month, TeamMate acquired StandardFusion, which extends the platform into risk and control management.
With that, I'd now like to hand it over to Stacey to discuss the strategic opportunities for Wolters Kluwer and her near-term priorities.
Thank you, Nancy and Kevin. As I take over as CEO, I've never been more excited about what's ahead for Wolters Kluwer. We are seeing the fastest technology adoption in history, and the opportunities for creating value for our customers and shareholders are tremendous. Wolters Kluwer is built on a strong foundation, a foundation that we are extending to drive growth and profitability. The business is diversified, with strong market positions and high-quality, recurring organic revenue growth. We see opportunities across the portfolio to leverage these strengths to create additional value. 85% of our revenues come from digital solutions, and the majority of that revenue, approaching 70%, comes from products that are powered by AI. Our ambitions go much further.
We are launching products with advanced AI functionality, which leverage our proprietary content, our deep domain expertise, our workflow expertise, and our advanced technology platforms, all to deliver enhanced value to our customers. Embedding advanced AI capabilities into our solutions is one of our most important growth opportunities. Our customers who have placed their trust in us for decades are telling us that's exactly what they need, and we are uniquely positioned to deliver it. Let's turn to the next slide. The strategic plan we set out a year ago is the right one. I plan to accelerate it in a few areas to capture the incredible opportunities we see. This will require some additional investment, taking our product development spend to between 12% and 13% of revenues this year and beyond. We will fund this investment while increasing our operating profit margin.
The increased investment and focus will help us accelerate the pace at which we are capturing the AI opportunities we have to deliver improved productivity and outcomes for our customers. My immediate priorities are, one, to accelerate our pace of innovation to capture strong market demand. We all know that AI will fundamentally change how professionals work. We have the opportunity to scale our current AI solutions while driving more new products into the market. Our proprietary FAB AI enablement platform enables us to accelerate development cycles and improve customer integration. Two, we will foster and scale our expanding list of strategic partnerships. These relationships allow us to be fully embedded in our customers' workflows and ecosystems, extending our markets and the value to customers. And three, we will optimize value capture by using data-driven, scalable sales, marketing, and revenue processes that intensify our go-to-market approach.
Moving to the next slide, we bring four unique advantages to the table that, in combination, no LLM or AI-native disruptor can replicate. This is our moat. First, trusted proprietary content, a foundational strength that supports our customers in their daily mission-critical and high-stakes decision making. Second, customer-centric modular software platforms, which deliver productivity benefits and data-rich insights while providing audit and traceability capabilities as the system of record. Third, market-leading validated AI that builds on our 190 years of domain expertise. We ground our AI models in proprietary content and data, we also apply expert reasoning layers, deploy our deep expert network to validate and tune outputs, and operate with enterprise-grade security and compliance. This is scalable AI designed for high-stakes, regulated professions where our customers cannot afford to get it wrong, and it is already deployed and being used daily across our markets.
Lastly, we have deep ecosystem integration. It's not just about being right, it's also about being so embedded that we are present at the moment decisions are made, both inside and alongside the customer ecosystem. These advantages power our strong brand, our deep customer relationships, and position us to lead in the age of AI. Let's look at some examples. Our CCH Axcess Software suite for U.S. accounting firms is a cloud-native modular platform that leverages our proprietary content and domain expertise and integrates with the accounting firm's data and the end client's data. Our Expert AI technology amplifies this foundation with agentic capabilities that drive significant efficiencies for firms. We have recently launched six Expert AI-powered modules that cut across the workflow, from document intake and analysis, to faster collaboration, to conversational intelligence, and to provide proactive advisory and insights.
Feedback from accounting firms on these new AI modules has been very positive. They love the seamless integration with their own data and the security that our solutions offer. With these launches, we are also evolving our pricing models from tiers of users for our classic desktop offering to hybrid approaches that factor in firm characteristics, usage, or outputs, such as the number of returns or engagements. Turning to the next slide, let's move to legal. We are the leader in proprietary legal research in Europe and offer deep expertise in specialty areas such as securities law in the U.S. Our position is grounded in the unmatched depth and authority of our legal content. Just a few weeks after closing the acquisition of Libra, we have launched the Libra Legal AI Workspace in the Netherlands, Germany, Italy, and Poland, a significant expansion of our capabilities.
The workspace provides lawyers with an integrated working environment that combines Libra's powerful AI capabilities with our proprietary content. It is also connected to our workflow tools, such as Kleos practice management. Our corporate legal software tools, such as ELM, Legisway, and Brightflag, are not shown in this wheel, but we are actively deploying expert AI capabilities across these as well. What differentiates us from other players in the market, including standalone AI assistants, is a single platform for research, analysis, and document creation, seamlessly integrated into existing workflows and customers' data. Trusted AI output based on current, curated, and country-specific legal content, including legislation, commentaries, specialist literature, and practical guides, and comprehensive transparency and traceability of sources. Customer feedback is very strong, and leading law firms have signed up.
They appreciate the unified workspace, the way the output is presented, the integration with Outlook, and the quick time to market. In Health, UpToDate has evolved from product to platform. From its original focus of providing clinical decision support, today, UpToDate Enterprise offers an integrated modular platform that drives clinical outcomes for the enterprise. Our harmonized content and tools provide value across the continuum of care, from diagnosis, to treatment, to drug dosing, and patient-level education. 75% of our enterprise customers today purchase additional modules beyond core UpToDate. It is also embedded directly into the clinical workflow. API connectivity with all the major EMRs, partnerships with leading ambient scribe vendors, integrations with local hospital guidelines, and connections to pharmacy and other systems. Last year, Enterprise was enhanced with UpToDate Expert AI, the conversational interface that gives clinicians fast, accurate answers grounded in our own proprietary content.
We also recently launched Medi-Span Expert AI, which provides medication intelligence for hospital pharmacies and third-party developers for a range of use cases, including agentic workflows like AI-driven prescription renewals and medication verification. Let's dive into UpToDate. UpToDate is long focused on supporting clinicians within healthcare institutions. Over 80% of UpToDate revenues and usage are from institutional customers. The UpToDate user base has grown to reach over 3 million currently. Our user base is strong and enduring. We have been driving growth by upselling across our solution suite, adding new functionalities, and launching new offerings for care areas. In terms of usage, the metric we track for UpToDate is clinical content interactions. Each year, UpToDate supports between 600 million and 700 million clinical content interactions. Importantly, web, public web traffic is not a reliable proxy for engagement, as it excludes usage outside the public web, such as EMRs.
What matters most is that retention remains very strong, NPS is world-class, and the core value proposition of evidence-based clinical decision support at the point of care remains highly resilient. We take our competitive edge seriously and continue to innovate with our customers. With a large, loyal institution base and sustained engagement across workflows, the next phase of growth is about expanding the enterprise platform while driving rapid adoption of UpToDate Expert AI. UpToDate Expert AI is the market-leading solution for health enterprises. Our customers rely on us for our trusted foundational content and our triple-layered expert-in-the-loop process. Also important for our clinicians is that UpToDate Expert AI is the only leading clinical solution with accreditation for continuing medical education. Moving to the next slide, you can see the strong demand for our solutions and the trust advantage we have in response to the rollout of UpToDate Expert AI.
As of this week, we signed on about 1/3 of our enterprise customers across the largest and most prominent health systems in the U.S., representing approximately 1,600 hospitals. These include health systems that are piloting tools from other LLMs or medical AI vendors. Before going live, Expert AI has to go through rigorous governance process and security reviews, and activation is also accompanied by training for clinicians. Feedback is positive, thumbs up rating to answers is high, we are in active engagement with customers to expand capabilities, including dosing and local content. The individual offering, UpToDate Pro Plus, is also making progress. This is a premium bundle with Expert AI and other value-added features, we are also seeing strong usage trends by those who have chosen to upgrade. This is available at discounted rates for students and trainees to encourage early career adoption.
I'm very excited about the momentum of Expert AI, and we are laser-focused on continuing to improve and expand the capabilities of our platform. As I said at the start, we see opportunities for growth across all parts of the business, both in enhancing the core and extending our addressable markets. Let's turn to the next slide. AI is powering growth across both levers. On the core side, AI takes capabilities customers already rely on and makes them meaningfully better. These use cases drive growth by increasing the value and stickiness of our core products, supporting higher retention, consistent annual price increase, and in some cases, upsell.
On the market expansion side, AI powers entirely new use cases that we do not address in the workflow today, such as drafting and review in our legal workspace and proactive insights, scenario modeling, and advisory in CCH Axcess and CCH Tagetik. It also allows us to build offerings for new segments, such as Ovid Guidelines for medical societies, to streamline development of clinical practice guidelines. Here, we monetize through premium packages, add-ons, or new offerings, but always tied to clear customer value, and many of our premium packages are tied to tiers of usage, productivity, or outcome improvements. This is a transformational opportunity, and our competitive position has never been stronger. We will increase our investments to deliver more AI solutions while also increasing operating margins and expanding our innovation capacity.
As we scale AI-powered expert solutions, we benefit from operating margin leverage, driven by stronger retention and higher customer lifetime value. The deployment of AI internally is driving margin improvements as well. It is already raising our development team's productivity and increasing our developers' capacity, allowing us to do more with the same number of engineers. Similarly, in customer support and other functions, we are seeing significant savings from the use of dedicated AI agents that can handle routine calls, allowing us to not replace natural turnover in staffing levels. The combination of these actions allows us to increase investment in our AI roadmaps and deliver growth while increasing our margin. Now, let me turn to the outlook. As noted in our release this morning, we expect another year of good organic growth, with all divisions contributing.
While there will be some quarterly phasing to take into account, as detailed in our release, for the full year, we expect Health and Tax & Accounting to deliver organic growth in line with 2025. We expect Financial & Corporate Compliance, Legal & Regulatory, and Corporate Performance & ESG to deliver organic growth ahead of the 2025 levels. The outlook for the group as a whole, as shown on the next slide, is for good organic growth, a further margin increase, and high single-digit growth in diluted adjusted EPS in constant currencies. Importantly, we expect to increase the margin while we simultaneously increase product development spending to between 12% and 13% of revenues in 2026 to further advance our AI strategy. Let me wrap up on the next slide.
We are well-positioned as a market leader in growing markets, with a track record of driving growth through innovation and of creating value for shareholders. We are excited about the opportunities ahead of us, and we look forward to executing on our priorities. Operator, we can now turn to questions.
Thank you. We will now begin the Q&A session. If you would like to ask a question, please press star followed by one on your telephone keypad. To withdraw your question, please press star followed by two. Please also ensure that your phone is unmuted locally. As a reminder, that is star followed by one to ask a question. We will pause for a moment to allow questions to be registered. Our first question today comes from Nick Dempsey from Barclays. Nick, please go ahead.
Yeah, good morning, everyone. I've got three questions if possible. Just first of all, you've got that chart on slide 34 showing your margins going up over time. I guess some people will say that in 2026, the sale of FRR and some low restructuring accounts for at least all of the guided margin improvements. Excluding those factors is kind of sideways. As at the same time, you've moved your product development spend up to 12%-13%, and that's permanent. Can we get some reassurance that margin improvement of a similar rate to that chart is what you expect beyond 2026? What kind of savings can you put in place to continue achieving that? That was just one question.
Second one, can you talk about a bit more about customer reaction to your AI offerings at UpToDate and in Tax, as you've been collecting those up in the last few months? Third question, given where your shares are, I guess it seems like it would make sense to do a higher buyback than you are doing. Do you consider slightly changing your thinking on gearing, given that the share price is at a low level, how attractive it would be to buy back your shares?
Okay, thanks very much. Why don't I take the first question, Kevin, and then I'll hand over the margin, another question to you. In terms of the customer reaction, we are seeing very strong positive reaction to all of our AI and agentic solutions that we've been launching. With respect to our Expert AI solution within Health, feedback is terrific. We hear from our chief medical officers that the expert clinician in the loop approach, which I described earlier, gives them confidence in our product as opposed to training on raw medical literature. They love the interface.
They like the quick summary, along with the underlying assumptions, the nudges that we include in the interface, as well as the seamless platform that we provide to them when they also include patient-oriented content on the enterprise solution, drug dosing, guidelines. Very importantly now is the integration with the ambient players, which allow for much more efficient clinical notetaking. Our partnerships that we are expanding are very well received by our customers. One of the things that's really important in these, you know, high-stakes environments is that they trust both the precision that they get from our solution, as well as the protection in terms of data privacy and safety. They're rolling out the systems quickly.
We're very pleased that we have 30% of our enterprise base already signed up, and we expect that number to rise to about 70% by the half year. Very strong feedback. We're seeing also very good adoption of our AI solutions within our tax business. As you saw earlier, we recently launched DXG, AI, and agentic solutions, we are seeing very positive reactions. They love the fact that they drive significant productivity gains. In one of the solutions we've been testing, there's about three to four hours of savings per week for our professionals. Again, they feel that combination of trust that we have in our solutions that are very much embedded in their overall enterprise. A strong reaction so far.
With that, I'll hand over to you, Kevin.
Great. Thanks, Stacey. Nick, I'm gonna address your margin question first. Yes, you're right, the FRR business unit was below the group average, but I'll remind you, it is relatively small, just over EUR 100 million. While it does improve the margin, not by a whole lot in the grand scheme of things. You were asking questions about beyond 2026, what margin development will be. While we're not giving guidance beyond 26 today, I can tell you that you've seen a good improvement in the margin over the years due to a couple of reasons. First, mix shift in revenue. You know, as we scale our expert solutions, they tend to have better margins overall.
Another thing I would point to is operational excellence is embedded in the DNA of Wolters Kluwer. Every year we're looking to work more efficiently, certainly, internally, use of AI tools is also helping on that grade. You know, the improvement in margin you've seen over the last several years, we're certainly guiding to that for 2026. Based on the reason I've given you, I do expect that that trend would continue. The next question you had was on the share buyback. On the share buyback, you know, one of the priorities we have, or we try to balance our priorities in capital allocation, first, investing in the business, both organically and through both on M&A. Secondly, pay down debt. Thirdly, we wanna make sure we reward our shareholders with our progressive dividend and share buyback program.
That is what we are constantly looking at, striking the right balance, and we believe the EUR 500 million share buyback that we're announcing today for 2026 is at that right balance. You know, we've considered acquisitions of the past. I think in the last 18 months, you've seen us spend EUR 1.3 billion on acquisitions, most notably Finca, RASi, Brightflag, and those have all been very strong acquisitions. In fact, they're performing ahead of our initial expectations, so we're delighted about that. Our leverage right now, our leverage is at 2.0 times. We are in the good middle of our leverage range. The buybacks we've done in the past were EPS accretive. We expect this buyback will be EPS accretive.
Finally, I want to remind you, we'll be returning close to 100% of our free cash flow to investors through our dividend and through our share buyback program. I hope that gives you a little bit of insight into our thinking as we announce the share buyback program today.
Thank you.
Thank you. Our next question today comes from Ciarán Donnelly, from Citi. Please go ahead.
Yeah, thanks for the presentation and taking my questions. A few for myself. Firstly, on the increase in product development spend, can you help us understand why the 12%-13% is the right range and how you've landed on that? Just in terms of your comment around the increase in spend to capture the AI opportunity, how should we think about the timeline to see that translate to accelerated organic revenue growth? Maybe secondly, just going back to that margin question from Nick, could you quantify the contribution from the FRR disposal, just to understand that like-for-like margin progression in 2026? That'd be great.
Just lastly, on the dynamics around deferred income, I'd say it has increased year-on-year, perhaps as a timing factor, but if you can help to understand the dynamics around that'd be helpful. Thanks.
Why don't I start with the question around the increase in product development? Let me just start by kind of giving a little bit more detail on the Foundation and Beyond platform that I briefly mentioned earlier. The foundation and beyond platform is a platform that we built to allow all of our product and engineering teams to rapidly develop and integrate AI and agentic capabilities into both our content and software products, and it leverages our proprietary content and deep domain expertise. This is the internal model that we use to be able to deploy solutions quickly. The key strength of the platform is that it's model agnostic, so the teams can switch between different LLM models to select the best model for their use case.
It also gives us the guardrails that allow us to give the trusted and very protected content that our customers rely on us for. Because we created that offering and really deployed it across the enterprise mid-year last year, our teams are able to develop our AI and agentic solutions more quickly. That's why you've seen, you know, six of the releases that we were able to do in CCH Axcess, for example, and the solutions across our portfolio. What we're able to do is to increase the resources, product leads, our subject matter experts, to be able to leverage that platform and deploy more quickly. We have this great combination of, you know, having an efficient way of building our agentic solutions, and we're able to move our roadmap up more quickly.
We've got all of our teams focused on our horizon 1 launches, and now the investments can support the kind of horizon 2 and 3 work to begin. We think it's a, you know, it's a great way for us to balance our ability to get our launches out more quickly. We also have, you know, increased investments to improve and accelerate our development. Maybe, Kevin, you could hit on the other questions?
Sure. Yeah, coming back on FRR, Ciarán, as I mentioned, the business unit was a smaller business unit, just over EUR 100 million. The margin was below our group average. In fact, the margin was like mid-single-digit margin, you can use that to factor into your modeling going forward. The exit of that business will be a positive for margin, but again, probably a smaller impact as compared to the more important mix shift of revenue and continued operational excellence programs throughout the business. I hope that helps you. Now, on the deferred income, I may ask you to repeat your question, I think it was about the deferred income increase on the balance sheet.
Yes, indeed, with the growth of our subscription revenue portfolio, signing contracts for longer-term periods, you do see an improvement in deferred income. I'd also remind you that on the balance sheet, the face of the balance sheet, you will also have to consider the deterioration in the US dollar as compared to year-end 2024.
Let me just go back to the question earlier, where you also were curious about how the investment turns into, you know, shows up in the revenue. As you know, the vast majority of our revenue is subscription-based, and as we roll out our solutions and adoption increases, you'll start to see that flow through into our revenues in the midterm.
All right, perfect. Thank you.
Thank you. Our next question comes from Christophe Cherblanc from Bernstein. Please go ahead.
Yes, good morning. I had two questions. The first one was on Tax & Accounting. The operating leverage was super impressive in 2025, with a drop of over 60%. Is that a level we should expect again in 2026? The second question was just on the buyback. Because of the buyback, you have been shrinking equity. Is there a need to retain positive book equity? Is that a reason why you cannot buy back more than EUR 500 million or EUR 600 million, given the level at which book equity is at the end of 2025? Thank you.
Okay, thanks. Kevin, why don't you take these?
I did not quite get the first question on TAA, Christophe, but I will say.
He's asking about the operating leverage, why it dropped.
Okay.
Yeah.
I will say... Let me start with the share buyback. Obviously, we consider a lot of things when we consider the allocation of capital. Obviously, we do have to consider equity as part of that. As I said, we're trying to balance the priorities of this allocation between investing in the business organically and through both on M&A, leverage, and finally rewarding our shareholders. Obviously, we want to have a robust balance sheet so we can take opportunities as they come. All of these go into our thinking when we're thinking about dividends, share buybacks, and other capital allocation considerations. Also, on Tax & Accounting, I think you were saying the leverage, the improvement in the margin in Tax & Accounting. Certainly, you know, we are seeing-
Yep
... good throughput on the revenue growth in that business. You know, revenue growth at 7% certainly gives us the ability to improve margins. Tax & Accounting, just like every other business, you do see a positive impact of the mix shift in revenues. You know, the more and more that business moves to software and SaaS software, we do see an improvement as these products mature. Operational excellence is key throughout Wolters Kluwer. That does underpin what you see in the improvement in the margin.
Just sorry to insist on this, but is it by law, legal constraints, that you have to maintain positive book equity?
No, we absolutely take equity into account.
Can you go into negative?
We absolutely take equity into account, but as we do other priorities I've mentioned.
You cannot go into negative equity, correct?
Like I say, Christophe, this is one part of our capital allocation criteria. We consider that amongst other things.
Okay. Thank you.
Thank you. Our next question today comes from George Webb from Morgan Stanley. George, please go ahead.
Hi, morning, Stacey, Nancy, and Kevin. Thanks for taking my questions. Look, just before I go into those, I guess one final congratulations from my side, Nancy, on your extensive career achievements, and I wish you all the very best in your future endeavors.
Thank you.
On the question specifically, I think it's three areas I'd like to go on some of the questions. Firstly, you mentioned partnerships being a priority for you, Stacey. Could you maybe elaborate a little bit on what partnerships those might include? Are we sticking to the, I guess, more traditional playbook of SaaS vendor partnerships and other areas you can get your content and product in front of people? I think more recently we've seen some players out there decide to do more specific partnerships with certain AI labs. Would that be something you consider, or would you prefer to keep a more multimodal approach?
Secondly, on the Health division, I guess within that mix, in talking to the kind of growth rate being steady year-over-year, UpToDate is an important part of that. You mentioned the retention remains very strong. You mentioned the number of clinical content interactions that move through the system being pretty consistent. Could you kind of add any color on where your gross retention runs at for UpToDate? I presume it's low 90s, but anything over that and how that's been evolving would be helpful. Also, if you're seeing any specific usage pattern differences between users that now have the conversational Expert AI front end versus those that are not using that or don't have access yet. Lastly, one, maybe one for you, Kevin, on the product development increase of 1-2 points.
How much of that do you expect to come through CapEx versus OpEx this year? Thank you.
Thanks, George. I'll take the first two. With regard to partnerships, we are very focused on making sure that we can be deeply embedded in our customer's workflow. As I mentioned in Health, you know, we're all very focused on extending the partnerships, many of which we've announced, but we will continue to move in that direction to make sure we've got strong partnerships. This is all about making sure, you know, we're embedded in our customer's ecosystem. Similarly, in Tax, we've always over the last many years, we've had, you know, a tax marketplace with the API connectors. We're looking at how do we, you know, enhance that as we think about the agentic capabilities.
In terms of our use of the foundational models, our FAB Platform, which I mentioned earlier, includes all the core foundational models. We make sure that we are using those capabilities that are, you know, the right ones for the right use cases. That's our approach for now. In terms of our Health business, as I mentioned, our business is very strong. Our enterprise customer base, you know, as, you know, has high renewals and continue to have very strong renewals and upselling last year. In fact, we signed more multi-year contracts for longer durations with higher annual contract value last year than we had in prior years. you know, what's happening is that our customers are...
You know, certainly we're very focused on the adoption of Expert AI, but we're also very engaged with our customers to extend the value along the full platform that we offer. You know, expanding with drug information, drug dosing, patient education, guidelines, and so on. Again, the health of the business is very strong. In terms of usage patterns, yes, in fact, we see that when our customers move to Expert AI, they do very deep conversational interfaces. They're much faster in their ability to get to their answer. We see strength there, and we see that across the portfolio, strong productivity improvements when our customers are adopting our AI and agentic solutions. I think the last question, Kevin, for you.
Yes. On product development, the mix between CapEx and OpEx, I would expect it to be very similar, George, to what you see today. You know, usually our CapEx is about 5% of our revenues or so. Going forward, even though we're going to invest more, I think the balance between those two will be similar. It really all depends on. You know, IFRS requires us to capitalize costs once we reach technical feasibility. We'll evaluate this on each product and each investment idea going forward, but my thinking is it's gonna be very similar to what you see today.
That's great. Thank you, and good luck for your ahead.
Thank you. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. Our next question comes from Thymen Rundberg from ING. Please go ahead.
Thanks for taking my questions. Two from my side. Looking across the business, are there parts of the portfolio where customer needs or market dynamics are evolving or perhaps have evolved faster than you expected, and where that might lead to you to perhaps adjust your priorities over the next, let's say, the next one or two years? The second is on pricing. As your products continue to add a lot more functionalities and support more workflows for your customers, and so you're consistently adding more value to them, how do you think about your pricing over the next few years?
In particular, how do you approach, let's say, this more value-based pricing model so that the greater impact that your solutions deliver or will deliver is just more systematically reflected in the monetization? Thank you.
Yeah. Yeah, I'll take those. You know, in terms of the approach for, you know, how we make sure that we are at pace in terms of the customer demand for our solutions, you know, our, you know, the relationships we've had with our customers spans, you know, decades. We are with our customers daily and, you know, really helping them to understand the productivity gains that can be created when they deploy our solutions. In fact, I was talking to the leader of our Tax business, who just came off of his sales meeting, and he was saying that the difference between last year and this year in terms of customer interest and recognition that these solutions can really deliver value has increased a lot.
We feel like we're at the right time now with the solutions we've launched, and as I mentioned earlier, we're just really excited to be able to launch even more of our capabilities because, you know, I think the customers recognize now that, you know, there are really nice opportunities for them. Particularly, you know, with many of our customers, they, you know, have challenges with just having enough supply of professionals, so they see the benefits of this. We're again, we're moving quick. What I would say around pricing is that our core strategy is price to price on value, and we have a variety of pricing metrics across our products today. We don't use a single metric.
For example, CCH Axcess is based on the firm size plus the number of returns. The UpToDate Enterprise is based on institutions. With our new AI solutions, you know, we're really using those to... In some cases, particularly for the AI solutions launched in 2023 and 2024, it was more about supporting our renewal rates with price increases and upselling that reflects the value. With some of the newer AI solutions, we are discreetly monetizing those solutions, and again, always focused on price to value. I'd say the unit of value varies based on the benefit we provide. For our Legal content businesses, Expert AI is embedded with our content. We typically sell that with kind of an upsell model.
For Libra, which is the solution that moves us into, you know, new addressable market with the legal workspace, the average price is about 2x the value of the content offering that we would sell to a law firm. What we do is we get the benefit of combining the trusted, deep, proprietary content into the legal workspace Libra solution, which provides an extension to do contract drafting and contract review. You know, the value is evident. In CCH Axcess, for example, for the client collaboration AI tool, we tie it to request lists that are sent out, which is a measure of output. In intelligence, we have consumption tiers. That's also a solution within the CCH Axcess suite.
You know, so we're really looking at the value we're offering and reflecting that in the value and the way that we deliver our pricing.
Very helpful. Thank you.
Thank you. We have no further questions. Stacey, would you like to add any closing remarks?
Yes. Thank you so much. I really appreciate all the questions. We're excited to build on our momentum and to accelerate our strategy to deliver more value for customers while delivering continued good growth in 2026. Thanks so much for joining us today.
This concludes today's call. Thank you for joining everyone. You may now disconnect your line.