Wolters Kluwer N.V. (WKL) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the Wolters Kluwer conference call. My name is Nadia, and I will be coordinating the call today. [Operator Instructions] I will now hand over to your host, Meg Geldens, Vice President, Investor Relations, to begin. Meg, please go ahead.

Welcome, everyone. Thank you for joining us. We're very delighted to provide you this teach-in today. Our goal is to give you a fresh view of the Legal & Regulatory division and how we're deploying advanced technology to keep adding value for customers. As Nadia said, at the end of the presentation, we'll open for questions, which I will moderate. [Operator Instructions] Before we begin, I would ask you to read Slide 2 regarding forward-looking statements. The slides are available on our website. We won't be disclosing new information on current trading today. Please refer to our most recent trading update for details of the first 9 months of this year and our latest outlook for full year 2024. Now it's my pleasure to introduce our speakers. We're delighted to be joined by our CEO, Nancy McKinstry, who will provide some context and will be happy to address questions at the end. Next, Martin O'Malley, who is CEO of Legal & Regulatory, will provide an overview of the division and current strategic priorities. Next, Rimco Spanjer, who leads Information Solutions in the Benelux, will discuss that business in more detail and will highlight some of the GenAI functionality he is introducing in this region of Europe. And last but not least, Raja Sengupta, who leads Enterprise Legal Management Solutions, will provide a closer look at that business, the revenue model and the AI-powered solutions that are driving ELM's growth. So without further ado, I would like to hand over to Nancy to set the stage.

Thank you, Meg. Good afternoon, everybody, and thank you so much for joining us. I'm delighted to be able to put the spotlight on the Legal & Regulatory division today, a business which has been completely transformed over the past 20 years. So let me start by providing you a perspective on the division. Legal & Regulatory used to be our largest division based on revenue, but was also the most challenged due to its exposure to print and its fragmented and decentralized nature. Our goal today is to show you how this division has been completely transformed into a digital information solution and software business that is more closely integrated and leveraging centralized functions. As with our other divisions, Legal & Regulatory continues its deep domain expertise and proprietary content and combines this with advanced technology to continuously create value for our professional customers. If you look over the many years, one of the strategic decisions we made years ago was to undertake a program of divestments and acquisitions to refocus and strengthen the business. The divestment shown on this slide removed around EUR 300 million of annual revenues. In addition, we made about a dozen smaller disposals, which removed a further EUR 70 million in annual revenues. Many of the divestments were low growth or declining businesses, several were noncore activities such as advertising-driven trade publications and many had low margins. At the same time, we made selected bolt-on acquisitions to accelerate our digital transformation and to build out our software business. This proactive portfolio management has led to a smaller but much stronger business that is focused and well positioned competitively to drive innovation and profitable growth. With that, I'd now like to hand it over to Martin O'Malley to talk about how his team is creating value for our customers, investing in innovation and driving improved operating margins.

Thank you, Nancy. My name is Martin O'Malley, I'm CEO of Wolters Kluwer Legal & Regulatory. I joined Wolters Kluwer in 2017 to run the Legal & Regulatory business in the Netherlands and Belgium, and I've been leading the division since 2020. Prior to Wolters Kluwer, I spent 25 years in management and commercial roles in the digital information and software industry. I'm Irish, and I live in the Netherlands. And I'm looking forward to tell you more about our division today. The Legal & Regulatory division comprises Information Solutions and Software. We serve legal and compliance professionals and law firms, corporate legal departments, universities and government organizations. We operate across 9 countries in Europe plus the U.S. and China. In 2023, the division had over 4,000 full-time employees and generated revenue of EUR 875 million. The Information Solutions side of the division accounted for about 77% of divisional revenues. In this area, we have #1 positions in all our European markets, except Germany. We have strong specialist position in the U.S., and we are a leading player in China. The Software segment of the division met up nearly 1/4 of the division's revenue and includes 2 units: a legal software business that offers practice management solutions for small law firms and legal practice management for small and midsized corporate legal departments. The Enterprise Legal Management, or ELM Solutions unit, focuses on corporate legal departments in large corporations. Here, too, we have leading positions in the markets we serve. Nancy mentioned the transformation of the division, which was achieved through consistent investment in product development combined with a radical portfolio overhaul. This overhaul of the division involved divesting noncore businesses while migrating the core strategic assets away from print and focusing investments on building and growing digital information solutions and software. This process has resulted in a much healthier revenue mix and a complete turnaround of organic growth profile, hit briefly during the pandemic, but quickly recovered the following year. So far in '24 through the first 9 months, we have reached 5% organic growth, and we expect our full year organic growth to be in line with or slightly better than prior year. Underlying this turnaround is a radical change in our revenue mix, as you can see on the next slide. Over the last 10 years, the proportion of revenues from print has declined from 41% of revenues to only 15% last year. And we expect the print component to continue to shrink in the years to come. Digital products, including software, account for 84% of divisional revenues in '23 and grew 7% organically. The digital information solutions share of that revenue grew at a similar rate of 7%. Meanwhile, the division has also increased its proportion of recurring revenues to nearly 80% of total revenues. Renewal rates are strong for our digital subscription products at over 90%. The nonrecurring piece you see here increased in '23 due to the fact that ELM Solutions became part of the division. So the print transition is behind us, and we're in a new phase of development. But before I talk about the future, let's touch on margin development and how we are streamlining operations. With the division's organic growth consistently above 2% to 3%, we have started to deliver steady margin improvement. The margin increases over the last 3 years have been driven by improved top line growth, the mix shift towards digital revenue, but also by ongoing efforts to drive operational efficiencies. Together with our colleagues and our central shared services units, we have been investing in advanced systems to drive efficiencies. We've been standardizing tools and streamlining internal processes. We've been sharing best practices across countries and have established divisional level centers of excellence for content and go-to-market activities. A few years ago, we merged our Dutch and Belgium business, which delivered important cost synergies. We're now also starting to leverage GenAI tools internally to enhance editorial, communications and customer service operations. Another area that we brought together over the years is our product development team, which sits in Wolters Kluwer's centralized product development function called DXG. DXG's mission is to drive faster and more efficient product innovation for all of Wolters Kluwer. Within DXG, we have a ring-fenced team of technologists who are dedicated to Legal & Regulatory. This dedicated team can draw on DXG's shared centers of excellence providing specialized expertise and skills in areas such as UX design, artificial intelligence and application security. The division works closely with DXG following a tried-and-tested development process that starts with understanding local customer needs and use cases. By combining the unique local language content of each unit with DXG's standardized technology, we can speed up innovation on time to market as well as leverage our technology scale. Our collaboration with DXG also enables us to improve the customer experience by moving to a common user interface and functionality, which is increasingly expected by our lawyers. Now let's turn to the future. With the print-to-digital transition behind us, we're now focused on further advancing our technology platforms and capabilities, addressing the needs of our customers. The key market trends that we observe are that laws and regulations and compliance needs continue to change and increase volume, which is increasing case loads for our customers. Legal processes are digitizing just like other professional workflows. This, plus the arrival of generative AI, is leading to accelerated adoption of advanced technology solutions in legal professionals. Law firms are also increasingly interested in combining trusted third-party content like ours with our own internal content using GenAI applications. Our most recent Future Ready Lawyer Survey from October of this year confirms the take-up of GenAI. 3/4 of legal professionals across U.S. and Europe use GenAI at least once a week and 1/3 are using it daily. In light of this market demand, we're continuing to advance our technology platforms, and we are prioritizing GenAI product features. Wolters Kluwer began embedding AI tools into solutions 10 years ago. In Legal & Regulatory, our first AI-enabled product was LegalVIEW BillAnalyzer launched 7 years ago. This was followed by other traditional AI tools such as legal contract analytics in our Legisway software. Last year, we introduced our first generative AI tools into several of our legal information solution products. Earlier this year, we added GenAI functionality to VitalLaw, which has been very well received by our U.S. customers. We are continuing this rollout to other markets as customers are responding very positively, noting that these tools are saving them time, boosting productivity and improving the quality of insights. We are following a deliberate steady process in rolling out GenAI tools, testing and learning along the way to ensure the tools add value to our customers. Embedding GenAI is one of the ways in which we're transforming our information solutions into expert solutions that deliver trusted content combined with workflow automation and productivity. Looking ahead, our strategic priorities are to continue enhancing our digital information solutions and scaling our software products, aiming to meet the evolving needs of our customers and capturing the opportunities we see in the market. We are sustaining high levels of product development spending, currently prioritizing the development of GenAI and other AI tools. At the same time, we will continue to pursue operational efficiency by streamlining and applying technology to our internal processes and using Wolters Kluwer shared services. I'm very proud to see our division's employee engagement levels are very high and rising, reflecting a healthy culture. We view this as critical to our future success. Now I would like to hand over to Rimco Spanjer, who leads our Benelux Information Solutions Group, one of the largest business units in the division, which is a good example of how we are advancing our technology platforms and integrating generative AI. Rimco, over to you.

Thank you, Martin. I am Rimco Spanjer, Managing Director of Legal & Regulatory Benelux since August 2023. I began my career with Wolters Kluwer in the Netherlands 25 years ago and was actively involved in different roles, in the transition from print to digital publishing, eventually joining the Dutch management team. After a brief period away from the company as CEO of Dutch publisher, Malmberg, I returned to Wolters Kluwer to head up the Benelux business. Let me start with an overview of our Benelux business before I discuss the typical customer workflow and introduce to you our flagship product, InView. Our main customers are midsized and large law firms in the Netherlands and Belgium. In addition, we serve corporate legal departments, tax and accounting firms as well as legal professionals in the central and local governments. Our revenues in 2023 were almost EUR 200 million, with around 80% coming from digital solutions. No less than 87% is subscription-based recurring revenues. We work with some 5,000 expert authors across the 2 countries, and we employ around 730 talented people. This includes over 100 domain experts and 250 technologists. The technologists are part of Wolters Kluwer's central DXG's team that Martin mentioned and are dedicated to the Benelux. Looking at our product portfolio, serving legal and tax professionals, we mainly offer research solutions that assist our customers in their workflow. This includes providing them with current legislation, up-to-date case law and high-quality commentaries from our extensive network of authors. This content is enriched with technology that helps them find information and gain insight faster, making them more productive. We have a very strong market position in both Belgium and the Netherlands. Our business originated in these countries over 180 years ago, and our long-established brands are widely known and trusted among legal professionals in these countries. Our main competitor in both countries is Lefebvre Sarrut, a legal publishing group headquartered in France. In addition, there are various small, local, more specialized players. We are considered the leader in terms of content with the most comprehensive coverage of all legal practice areas and a highly respected author network with whom we have long-standing relationships. Our primary focus is to combine state-of-the-art technology with reliable and up-to-date content so that it adds real value for a legal professional. Our customers cannot afford to rely on information and insights they can't fully trust. This is what we stand for at Wolters Kluwer, when you have to be right. Now I'd like to zoom in on our largest customer group, the law firms. This slide shows you a typical law firm overall workflow, which includes keeping up with the latest laws and regulations, winning clients, working on their clients' cases and managing their firm. Legal & Regulatory Benelux supports law firms with information across this entire workflow, but most intensively in the keeping up-to-date and execution stages. In this execution stage, the law firm spends a significant amount of time conducting legal research, in large part by searching Wolters Kluwer's legal content. In this particular research stage, generative AI is transforming productivity the most. With GenAI, legal professionals will no longer need to rely on keyword search or sift through numerous search results. Instead, they can ask natural language questions and receive direct answers to their questions with references, delivering the specific information they need for their case in a fraction of the time it will take with conventional searching. We are currently in advanced beta testing in the Netherlands. The results are very promising. Customers can see the value of faster search and greater productivity, while having confidence in the outcome due to our proprietary high-quality content. To ensure the best results, we then have our in-house subject matter experts validate the outcomes and continually improve our AI system. Let's take a look at how we have been advancing our main legal research product and how we are integrating GenAI. We launched our first online legal information solution in the Dutch market in the 1990s. Since then, we have continuously invested to keep advancing our technology. In 2012, we launched Kluwer Navigator, which was very successful in the Dutch market. In 2021, we introduced InView, our next-generation product which won the prestigious CODiE Award for Best Legal Solution in that year. Renewal rates for InView are well over 90%. InView is the most comprehensive legal research platform in the Dutch market. It helps a lawyer stay updated on the latest developments in their specialized legal area such as company law or labor law, ensuring they are aware of changes in law and can provide accurate and relevant advice to their clients. When they work -- when they start work on a specific case, InView supports them in conducting legal research to determine the best strategy for their client. This research involves analyzing the law, case flow and commentaries related to the case. The blue circles on the slide refer to the existing alerts and keyword search functionality. The green circles show where we are currently enriching the offering with GenAI tools to further enhance our customers' productivity. As mentioned, the beta version of our first GenAI tool for Dutch customers was received very positively. We will be adding other GenAI modules to InView to further enhance value for lawyers, further streamlining their research process, providing them with the best tools to efficiently and effectively handle their cases. Now that we have looked at our customer workflow, the InView product and recent GenAI integration, I would like to discuss the underlying technological infrastructure. As Martin mentioned, in 2021, we merged our Dutch and Belgium businesses. This has resulted in a single management team overseeing operations in both countries and offering the same customer propositions. We have successfully integrated various functions, including finance, HR, sales, marketing, the content unit and product development. Currently, together with DXG, we are in the process of putting in place a unified technology platform across both countries. This new technology platform will further enhance the customer experience and will introduce a common front end across countries. While the legal content differs across countries, the technical content management requirements are largely the same and customer demands are similar. The new platform will improve scalability and drive growth. This platform will also provide our authors with one central environment where they can update their content. It will also serve as a content management system for storing all our content in the Benelux region. We will be rolling out this new unified technology platform in the Benelux initially. Our plan is to then implement it in other countries such as Hungary, Italy and Poland. In parallel, we are moving to a single brand, InView, for all our research propositions in the business unit. To sum up, in the near term, our team in the Benelux is focused on 4 key priorities. Firstly, we will complete the rollout of our new technology platform in the region. This will improve the customer experience, drive growth and scale the business. Secondly, we will continue integrating GenAI tools and other productivity solutions into our platform to add further value to our customers' workflow. Thirdly, we will look for opportunities to extend our offering along legal workflows. And lastly, we are also always focused on driving operational excellence, from finding efficiencies to expanding author relationships to optimizing our go-to-market. I hope this gives you a good sense of how we are servicing our customers in the Netherlands and Belgium and of the steps we are taking to increase our value and market position. I'd like to now hand over to Raja Sengupta, who will talk about our ELM Solutions business.

Thanks, Rimco, and thank you all for your time today. I'm Raja Sengupta, Executive Vice President and General Manager of Wolters Kluwer's Enterprise Legal Management business. I will refer to it as ELM going forward. I've been running ELM business for close to 4 years now. I joined Wolters Kluwer in 2012. I ran two other businesses in governance, risk and compliance space before heading ELM. ELM Solutions is a global expert solutions business, providing workflow productivity and compliance offerings to legal departments within large corporations as well as the law firms they work with on legal matters. Over 80% of ELM revenue is cloud based. In order to serve the entire spectrum of market needs, we offer two software products. One is TyMetrix 360°, a highly configurable multi-tenanted SaaS product, which we host in the cloud. And the next is Passport, a highly customizable single-tenant product, which either we can host in the cloud or clients can host themselves on-prem behind their own firewall. In addition to those two workflow software products, as Martin mentioned, we offer a fast-growing, AI-enabled managed service called LegalVIEW BillAnalyzer. This product leverages AI-enabled technology, coupled with human expertise. ELM now has a scaled position in this organic product innovation, and it is our biggest growth driver. This legal bill review offering helps our clients and their law firms ensure compliance with billing policy guidelines on law firm invoices, which can be extremely complex. And more importantly, it helps cost savings by identifying anomalies on the law firm invoices. The underlying AI technology is what you may call traditional AI as opposed to generative AI. At its core, we deploy natural language processing and deep learning machine learning technology. LegalVIEW BillAnalyzer AI is trained on each of our specific clients' billing guidelines for their law firms as well as industry best practices. And it also constantly learns from humans with deep domain and contextual expertise, who sometimes correct the AI output. And finally, I wanted to call out that all of these export solutions are powered by world's largest and most comprehensive database, which uses anonymized invoice data to enable insights and cost savings for corporate legal departments. We have over 200 enterprise clients, including over 100 what you may call Fortune Global 500 corporations. These corporations typically have large budgets, legal budgets and complex legal needs. Our target client profile is large corporations with high level of legal spend due to litigations and other high-stake legal matters requiring extensive internal as well as external legal counsel advice. Our software helps our clients track all legal matters and their progress, simplify electronic billing and reviewing and approval of invoices. It drives efficiency and cost savings. It fosters engagement and collaboration between corporate legal departments and their law firms. It provides key reports and insights. Once a corporate client chooses our solution, they require their external law firms to utilize ELM platforms to process law firm invoices as well as collaborate on legal matters. This includes over 15,000 law firms globally, including the top ones such as AmLaw 200. User profile in law firms range from billing administrators to paralegals to lawyers from first-year associates to experienced partners. By using our products, law firms can ensure compliance with their clients' guidelines, reduce payment delays and sometimes even find more business with their client. In fact, this year, we launched an organic innovation called LegalCollaborator to facilitate the engagement process and competitive bidding on specific matters. ELM is recognized as the market leader, as Martin mentioned in his remarks, including by IDC, a leading market research firm, whose most recent results are shown in the right-hand side of the slide. Our key competitors in the enterprise segment include Mitratech, Onit and Bottomline, all of which are currently owned by private equity investors. I should note that Bottomline is not reflected in IDC's assessment as Bottomline primarily focuses on insurance claims departments, whereas we and the other players I mentioned, we serve both insurance claims departments and corporate legal departments. As should be clear from the size of the bubble in the chart, Wolters Kluwer ELM commands the largest market share in the market segment we play in. Our business model is a mix of client subscriptions and fees related to law firm invoices, which corporate legal departments are contractually obligated to process through our platform. We believe this flexibility is attractive to corporate legal clients as well as to the law firms, reflecting the value provided to both sides. So roughly 60% of our revenue, of ELM revenue, comes from processing fees linked to law firm invoices. This is a relatively common practice in our industry. For those of you familiar with credit card or payment processors, this is a similar model. We charge a percentage of the law firm invoices for the services we provide to both corporate law departments as well as law firms. So while that portion of our revenue can vary at a particular client level, over a short period of time, the total transactional revenue for ELM for the total portfolio of over 200 clients is stable and growing. Also, as I mentioned earlier, LegalVIEW BillAnalyzer, which is our biggest growth driver, and that falls into this category of revenue, which has resulted in relatively higher growth of this revenue category. Next, approximately 30% of our revenue is recurring subscriptions paid by the corporate clients, typical in software -- enterprise software subscription model. And finally, about 10% of our revenue is nonrecurring in nature related to implementation of our software or subsequent professional service. We are excited about our future, focused on our strategy to deliver market-leading customer experience, product offerings and growth. We will sustain and will expand product superiority by investing in innovation and core software product enhancements, including AI-enabled features and new workflow tools like our most recent organic innovation, LegalCollaborator. Next, we'll continue to grow rapidly in the legal bill review space with our AI-enabled LegalVIEW BillAnalyzer. In this segment, we are seeing success in converting greenfield as well as competitive wins. This offering is a key organic growth driver for ELM, and we have runway left for continuing high growth. We are also selectively pursuing strategic adjacencies that are close to our core franchise. We rigorously evaluate, build, partner or buy options to tap into these opportunities. And last, but certainly not least, we are continuing to drive operational excellence by investing in technology and optimizing delivery. Again, thank you for your time. And now I'll hand it back over to Martin.

Thank you, Raja. Before we take questions, I'd like to recap our main messages. Legal & Regulatory has been transformed. We're now a strong and growing business able to drive good organic revenue growth, while at the same time improving margins. Our investment is focused on continuing to advance our platforms and maintaining product superiority while creating AI-enabled tools valued by our customers. We are leveraging our high-quality trusted legal content, exclusive legal spend data and our deep domain expertise in combination with advanced technology to create expert solutions. We are uniquely placed to continue helping our customers navigate the ever-changing landscape of laws and regulations and to streamline their workflows and improve their outcomes. I hope this session has been informative and educational, and I thank you for joining us today. Meg, back over to you.

Great. Thank you, everyone. We're going to now open for questions. So operator, if you would remind people how to pose a question, either through the webcast or on the conference call.

[Operator Instructions] And the first question goes to Nick Dempsey of Barclays.

I've got three questions, please. First of all, do you have customers who find the GenAI functionality so essential and useful that they want to step outside of their existing deals and pay extra amount straight away to get a hold of that functionality? Or is this being seen as another nice tool they may consider as part of their deal when their subscription renews? That's the first question. Second one, I think RELX in this area is focused on the fact that they have built their own custom LLM from the ground up trained on Lexis to drive their GenAI offering in Legal. Have you done the same thing? Or are you leveraging a standard LLM that you're applying to your content? And the third question, is it fair to say your competitors in each of your European geographies are now at a big disadvantage because they don't have the central tech development spending power that group as large as Wolters Kluwer have?

Okay. Can I suggest maybe Nancy and Martin address your questions, perhaps starting with this whole idea of how we're monetizing GenAI and whether customers are willing to step away from deals and pay extra now. So perhaps Nancy could start, followed by Martin.

Great. So what I will do -- first of all, Nick, thank you very much for the questions. What I'll try and do is just frame it for all of Wolters Kluwer and then ask that Martin really talk about L&R specifically. So across the board at Wolters Kluwer, we're using all the larger hyperscaler LLM technology. So in some cases, it's the offering from Alphabet; in other cases, Microsoft. So we pick and choose. We use those technologies, however, in -- against only our proprietary content. So a very secure kind of sandbox environment so that we can ensure product quality and accuracy. And we also overlay all of -- as you look at our commercial GenAI products that are available today, we overlay all of that GenAI and machine approach with, of course, our editorial expertise so that we make sure, again, that everything is of the highest quality and accuracy. And then secondarily, on the monetization, and Martin will talk a bit more about this is, in some cases, what we're doing is in the category of the sort of traditional enhancements that we make year in and year out on our products. It's part of what supports our retention rates, which are very high across the board and supports our annual price increases. In many other cases, we are getting what I would call new wallet share, or in some cases, even new customer logos. And that depends again on the ability of what we're doing, our ability to sort of demonstrate to the customer either greater insights or productivity benefits. And so it varies across the board. And now Martin, maybe you can specifically talk about what we're doing in Legal & Regulatory.

Yes, sure. Thanks for the question, Nick. Maybe just to take the first part first in terms of the response from customers. We've been working with this for a while, and I think, obviously, GenAI more recently. And what we see from customers is that the reaction is excitement, positivity as what we see with our own staff. There's, I think, a lot of enthusiasm about the potential. Where we are, I think, in that journey with customers, we're still in a test-and-learn phase. Customers are responding positively. They see the potential for increased productivity, but the level to which that productivity will be delivered, I think, is still the question. So it's seen at this stage more as an augmentation. I think we also need to recognize that there is an expectation that their workflows will have to be gradually adjusted. So we believe that this will be a gradual acceptance and embedding rather than something, a big step change. On the question of the technologies we use, we work very closely with our DXG group. We are continuously looking at models in terms of what's the best way to get the optimal result for the customer. But I think our secret sauce is the combination of whichever model we choose together with DXG, the customer knowledge and our content. Those are the 3 critical ingredients. And that, I think, is where at the end of the day, the choice of the model is not so relevant for us. It's that the outcome is of a high-quality level for the customers. So I think that's where our focus is. On the last point around competitors, obviously, we look at our competitors. We are very much focused on what we need to do for our customers. We have a very strong position in the markets we serve. And I think there, again, on the content side of the business, it's our unique set, but also the breadth of our content that really probably sets us apart in pretty much all of our markets with the exception of Germany.

Have we answered your question, Nick? Have we covered it, Nick?

The next question goes to Adam Berlin of UBS.

It's Adam Berlin from UBS. Two questions, please. Can you just give us a bit of help understanding how big each of the countries are, particularly within the European business within L&R. I know you went into detail about the Benelux business, but could you give us an idea roughly or a range of how big each of the countries are just so we understand that a bit better? And then maybe you can just go through the key countries and tell us who the main competitors are and what your market position is in each of the largest markets, particularly in Europe?

I think that's for you, Martin.

Yes. So we don't disclose, I think, details for every country. But what I can say is that if you take, I guess, moving from Western Europe to Eastern Europe today, the scale, it scales from large to small. So on the smaller end of the range, you need to think of countries like Czech, Slovakia, Hungary, with the bigger markets being Italy, Benelux, Germany and what am I missing?

Poland.

Poland probably.

Poland is one of the faster-growing markets.

China.

China, obviously. U.S., we've got a niche position. And the second part of the question was around competitors. So we have a -- in pretty much all of our markets, we have a unique set of competitors. So Rimco explained for the Benelux in Germany, Poland, [indiscernible] in Czech and Slovakia, some smaller local players. Those markets tend to be small. In Italy, [ IPSOA ], and obviously, in the U.S., you're talking about Thomson and LexisNexis.

Would you say -- sorry, would you say you're the #1 in those 4 big European markets, you mentioned Italy, Benelux, Germany and Poland. Are you the #1 player? Or how would you describe the opportunity in that...

We're #1 with the exception of Germany where we're #2. And there we're #2 in [indiscernible].

The next question goes to Robert Vink of Kepler Cheuvreux.

Two questions from my side. Firstly, I want to ask a question about the ELM, the Enterprise Legal Management software. Is it safe to assume this is essentially like a B2B marketplace? And can you elaborate on the strategic adjacencies that you're pursuing for this set of solutions? And my second question is kind of globally across your division. Do you see kind of a difference between artificial intelligence adoption trends across different geographies like North America, Europe, China?

Okay. I think the first two questions are for Raja about is this a B2B marketplace and what adjacencies might be of interest. And then perhaps, Nancy, you can give a global perspective on adoption, and perhaps Martin can add some color across Europe and the U.S.? So Raja?

Happy to take the first one. Thanks for the question. So it is essentially a workflow software that automates steps that corporate legal departments and their law firms go through when they're working on very high-volume complex legal matters. So it's really -- the way to look at it is a workflow software. If I have to give an example so that kind of place it in your mind, think about Salesforce or ServiceNow, those are workflow software, but obviously, they are more generic workflow software, where we in ELM, we built workflow software specifically for the needs of the law firms and the CLDs. And to your second question, we obviously look at what other work where productivity enhancement software could be helpful to corporate law departments or the law firms they work with. There are several. I will give you a couple of examples, but not limited to those. One is contract life cycle management and second is document management. In contract life cycle management, corporate law departments and legal and other departments as well, they work on drafting, reviewing and signing and storing contracts. In document management, this is where legal documents are written, stored, reviewed, flagged and managed. So those are areas we look into. As I said, we look at build, partner or buy to play appropriately depending on the attractiveness of those markets.

And if I could just augment what Raja is saying is the legal bill analyzer product line was, in fact, an adjacency as we work with customers and understood the complexity of the billing arrangements that they have with their law firms and the need to really monitor that and make sure that everything is being done to the agreements that they've engaged with. And then more recently, the launch of LegalCollaborator is another example of an adjacency. So we continue to explore these adjacencies, really working very intensely with our customers. And then as that turns into a product, we take our standard innovation process and work towards a launch in the commercial area. And then just on GenAI, and I'll ask Martin to just comment specifically on legal. But what we're seeing is that if you look across our professional customers of lawyers, doctors, accountants, nurses, financial service professionals, et cetera, all of them are at the stage of experimenting with GenAI, particularly at the larger end of those markets and very much adopting tools, but I would say still at the early days. So we're in that, what I call the early adopter phase. We're not yet in the mainstream maturity phase at all. And I would say, as you talk to customers of smaller sizes, regardless of the market, they are still a little bit at the wait-and-see level, largely because they don't have the budgets to really engage with the newer tools. But a lot of experimentation. I think one of the very positive things that I see is that we're having even deeper engagement with our customers. So we're actively involved across the board in pilots with customers in beta, et cetera. And so that's a terrific place to be right now.

Yes. Maybe just to add to that. I mean I think it's important to recognize that if you look at our legal professionals in general, they're not primarily interested in technology, but what they are looking for is a solution to the problem of the volume of work that they have to deal with, frankly, with less capacity. And I think GenAI has met the -- has increased the interest in technology as a solution to that problem. I would say that the -- if I look at the mid- to large-size customers globally, and this is confirmed in our Future Ready Lawyer report, which we just did earlier this year, actually in October, 76% are experimenting with it. So some of them are as much as on a daily basis. And there's also an indication of willingness to spend. So the interest is definitely consistent across the groups we serve, and I think that's very encouraging.

[Operator Instructions] While we wait, I will hand back to Meg for webcast questions.

Yes. I've got a series of questions that have been submitted through the webcast. So I'm going to take them one by one. Starting with I think something that Rimco might be able to tell us more about. So the question is, can you give us some more feedback on the Dutch beta test of the InView product that has -- you just added GenAI to? Some more feedback on that. And also, can you give us a bit of an idea about pricing of the GenAI functionality for this solution? Rimco?

Okay. Thanks, Meg, for the question. So when we look to the feedback, we introduced the AI module during a customer event in October this year in Amsterdam, where we were together with around 90 customers, and we see also their interest is increasing in GenAI due to their work is getting more complex. And what we did in the last 2 months that we tested around with 90 customers, they can -- they prompt themselves. So they used the functionality and they were very positive and impressed by the outcome. And most of all, also, they were satisfied with the answer that we are generating. So first on that. Secondly, let me talk a little bit about the functionality. So it is about question and answers. And we also -- as part of the answer, you also get 2 or 3 references to our commentaries. And if you open one of these commentaries, you can ask -- with AI ask a question to a document or you can translate it, you can summarize it. So you can do a lot of things. Your question on monetizing the AI, well, what we, of course, see is that there is a willingness to pay because there is a benefit when you compare this answer with the traditional search where you need to think about what is the keyword I want to use and so on. So it is -- that helps them with doing their work. On the price, we are in early days. So we are looking at different pricing models, and we will definitely implement the feature in 2025.

Yes. Maybe I can just add to that. I think this is consistent with the way we're approaching this across Legal & Regulatory. So we typically take it to the customers, we validate and then we go into the phase of how do we capture the value. And we're looking at 3 options in terms of value capture. One is looking at -- it's part of our subscription where you look at a higher price. We look at potentially premium options or potentially stand-alone modules like we have with legal bill analyzer product in ELM. But I think at this stage, it's in the phase of really quantifying what that value -- the real value delivered is in terms of increased productivity and ensure we get that pricing right.

And just if I can add on to Martin in other parts of Wolters Kluwer, not in the L&R area. We're also looking at pricing models, and we already have a few of these in place where you buy the core module, the core software, and then the GenAI agent or the capability, you're buying that as a transaction but within a group. So you buy kind of a set of clicks or a set of capabilities and you have different tiered pricing. So a bit of sort of a combination kind of subscription with some element of a banded transaction. So again, that's more on the software side of what we're doing at Wolters Kluwer. So again, still very early days to figure out how customers are going to accept these various different monetization tools or structures.

Okay. Great. I've got two more sets of questions from the webcast. This is on the software portfolio in Legal & Regulatory. So perhaps Martin and Raja can address this. Where are you in terms of cloud enablement and SaaS adoption of your software products? So perhaps Martin, you can address the practice management tools and Raja can talk about his ELM Solutions.

Yes. So just on the legal software, that's a piece out sort of ELM, we have two primary products. One is Kleos, which is used by small law firms. And the other one is used by corporate, so corporate lawyers for contract management primarily. And Legisway is predominantly cloud at this stage, SaaS model. Kleos has just been moved to the cloud, a SaaS model in place for a number of years. So you're looking -- you can, at this stage, account for pretty much the majority is cloud.

Yes. And as far as ELM is concerned, as I mentioned, 80% of our revenue is cloud, which includes 100% of TyMetrix 360°, 100% of LegalVIEW BillAnalyzer and the latest organic innovation of LegalCollaborator, and roughly, I would say 60% of Passport, the other software platform. Overall, it's close to 80%. And that's the cloud enablement for our ELM business. Thank you for the question.

Great. Thank you. Yes. Those two questions came from George Webb from Morgan Stanley. Thank you, George. Then I've got another question, which is for you, Raja, and this is coming from Sami Kassab at BNP Paribas. Can you elaborate on the legal bill contributory database that you have? Is it exclusive? Could somebody replicate this? And where do you source the content?

Thanks for the question. So the short answer to your question is, it is exclusive because we get the data when our clients, corporate law departments and the law firms they work with, they process their invoices for the type of work they do for these clients. As I mentioned, these are very high-volume complex legal matters. So we have -- we being the market leader, we have the largest database as a consequence. And as you know, an AI is as powerful as the data that trains it. So as a consequence, our LegalVIEW BillAnalyzer, which is AI enabled is so powerful and so well accepted by our clients. So...

We have -- yes. And just maybe to add, Sami -- for Sami's purposes, we have the legal rights in our customer contracts to use this data in an anonymized way, which is what powers the AI and the machine learning aspect of the offering.

Thank you, Nancy. Thanks for the question.

Moving on to Robert Vink from Kepler Chevreux, a follow-up.

Yes. I would like to ask another question about kind of the legal margins. Have you already addressed that in your presentations? As we know, the margins of the Legal division are significantly lower than the margins of your other divisions, which is probably partially related to the size of the markets in Europe. And in your presentation, you discussed the integration of Belgium and the Netherlands. I would like to know what are your expectations on the Legal margins, the Legal division in the midterm? And maybe you could provide some color on the Benelux business, its margin profile. And is the Benelux business margin profile significantly above the kind of business unit margin?

Nancy, do you want to take the first...

Yes. Actually -- sorry, Raja.

Yes. So I'll start, and then Martin and Rimco, you can chime in. So in the broad -- I have to say, I'm so proud of what the team has done in Legal & Regulatory in terms of if you look over the years, from a combination of the portfolio moves, the investment in innovation and very good growth that we have in digital information of 7% organic, those kinds of elements have been really instrumental at driving margin improvement on top of all of the cost efficiencies that the team has been able to achieve. So really quite proud of where they've come from. There's more that we can do. It starts with, of course, continuing the good growth that the division has achieved that will drive margins. Second thing is finding additional efficiencies. Martin, by way of example, is leading a specific effort we have around using GenAI tools in certain functions within the corporation, and we believe we will get some additional improved productivity from that, and that will, of course, enhance margins. And then finally, we've invested a lot in the software elements, both in the ELM business that Raja leads, but also in Kleos and Legisway on the practice management side. And so those businesses still need to get to a level where they're producing higher levels of margins. And so that will come as well. So the goal for Legal & Regulatory, if you look over the medium term, is to continue to get improved margins. So Martin, I don't know if you want to talk specifically about some of the things you're doing.

Yes. Maybe just to also add to, I think, firstly, on your point about the Benelux specifically. We could combine Belgium and the Netherlands. Despite the fact that they have different legal systems, they share language. And that was for the majority of our content because 80% of our content in Belgium is Flemish and the rest is French. So essentially, what we did there is we deduplicated a lot of the shared services, and that has improved the margin considerably, which kind of illustrates that if you have that scale, that you can really kind of take it back in margins. Unfortunately, in some of the other content -- in some of the other countries we operate in, the languages are too different to enable that. So that's one of the limitations we have. I think just in addition to what Nancy said, I think for us, what's important is technology and shared services. Technology, when we look at our platforms, despite the fact that we have local language, we actually work very much and I think the example Rimco gave of the platform that's been deployed in Belgium and the Netherlands, we're now deploying that same platform across other countries. And that obviously gives us a deduplication of cost that we would have had historically in each country. And AI is a nice example of that where we test and learn in one country. We kind of tune it to the local needs, but we use the same capabilities then across the different countries. So again, it's a way of doing our -- investing in AI in a way, which also generates a return on investment. And I think that's probably -- those would be the key areas. But we are optimistic that we continue to improve the margin as top line but also just improvements in our execution.

Okay. Hopefully, that answers your question. We also had that question from Bank of America. So -- but I think we addressed the margin. So Robert, if that covered your question, shall we just see if Nadia has any more? Or Nick, I believe Nick may be coming again?

Yes, we have a follow-up from Nick.

Yes. Just one last one for me. Kind of bringing all this together or attempting to. Is there any reason why the current sort of levels of organic revenue growth for Legal & Regulatory shouldn't continue for multiple years?

Why don't we have Nancy start with that?

Yes. As you know, Nick, we don't give long-term growth forecast for the -- for Wolters Kluwer. But what I can say is, again, the foundation is really strong. And I would just point to a couple of metrics. One is that the vast majority of our retention rates are above 90% in the division. And if you go back 20 years ago, that was not the case. So very strong installed base of customers, great customer relationships, strong Net Promoter Scores pretty much across the board for the vast majority of our products. So a very solid base. Martin, Raja, Rimco and the other members of the team have been driving a lot of innovation. That is what drives organic growth. As you know, the top-selling products in 2024 are things we launched 6, 7, 8 years ago. And so the path you have to follow is one of continuous innovation and product launches, and that's going very well at the division, so that will support organic growth. And then I think it's the sort of icing on the cake is how we capture the value of some of these new innovations. And again, I think one of the messages you've probably taken away from this conversation is that still early days, but we believe that there is growth in customer budgets, and we do believe there is opportunities for us to monetize some of the innovations maybe in a way that we couldn't have done 10 years ago. So I feel very strongly that the division is on the right track, and you should again see this continuous improvement in organic growth and operating margins. Martin, I don't know if you want to add to that?

Maybe just a couple things to add to that. I think, look, the print share, obviously not dragging on the growth, which you've seen historically is a big impact for us. But I think there is a -- I think we're at a point in time where there's a lot of exciting potential. And the question is how big that potential will be? I think that's what we don't know in terms of how the markets are going to develop. But I would really like to really amplify what Nancy said, we are in a very strong position in terms of our customer relationships, which is something I think we've put a lot of work into, and that has reduced churn, but also, I think, very strong retention rates. And we have a very strong organization. We've got very engaged employees. I think we have a good momentum in the business.

Great. I think that's a very good point to wrap it up. And it looks like nobody else has any more questions. Nadia, can you just confirm?

We currently have no further questions.

Okay. Great. Well, thank you, everyone, for listening. Some great questions. And if you have follow-on questions, feel free to send us an email, but appreciate your time today, and hope you have learned something about our Legal & Regulatory division. Thank you.

Thank you all.

Thank you.

Thank you, everyone.