diff --git a/frontend/public/locales/en-US/translation.json b/frontend/public/locales/en-US/translation.json
index 4f79f9d4d..a72c04221 100644
--- a/frontend/public/locales/en-US/translation.json
+++ b/frontend/public/locales/en-US/translation.json
@@ -1766,11 +1766,10 @@
       "rotation": "Rotation (degrees)",
       "opacity": "Opacity (%)",
       "spacing": {
-        "width": "Width Spacing",
-        "height": "Height Spacing"
+        "horizontal": "Horizontal Spacing",
+        "vertical": "Vertical Spacing"
       },
-      "convertToImage": "Convert result to image-based PDF",
-      "convertToImageDesc": "Creates a PDF with images instead of text (more secure but larger file size)"
+      "convertToImage": "Flatten PDF pages to images"
     },
     "alphabet": {
       "roman": "Roman/Latin",
@@ -1782,10 +1781,10 @@
     },
     "steps": {
       "type": "Watermark Type",
-      "textContent": "Text Content",
-      "imageContent": "Image Content", 
-      "style": "Style & Position",
-      "advanced": "Advanced Options"
+      "wording": "Wording",
+      "textStyle": "Style",
+      "file": "Watermark File",
+      "formatting": "Formatting"
     },
     "results": {
       "title": "Watermark Results"
@@ -1854,6 +1853,91 @@
           "bullet3": "Higher values create more spread out patterns"
         }
       },
+      "wording": {
+        "header": {
+          "title": "Text Content"
+        },
+        "text": {
+          "title": "Watermark Text",
+          "text": "Enter the text that will appear as your watermark across the document.",
+          "bullet1": "Keep it concise for better readability",
+          "bullet2": "Common examples: 'CONFIDENTIAL', 'DRAFT', company name",
+          "bullet3": "Supports all Unicode characters"
+        },
+        "fontSize": {
+          "title": "Font Size",
+          "text": "Control the size of your watermark text (8-72 points).",
+          "bullet1": "Smaller sizes (8-14pt) for subtle watermarks",
+          "bullet2": "Medium sizes (16-24pt) for standard visibility",
+          "bullet3": "Large sizes (30-72pt) for prominent watermarks"
+        }
+      },
+      "textStyle": {
+        "header": {
+          "title": "Text Style"
+        },
+        "language": {
+          "title": "Language Support",
+          "text": "Choose the appropriate language setting to ensure proper font rendering.",
+          "bullet1": "Roman/Latin for Western languages",
+          "bullet2": "Arabic for Arabic script",
+          "bullet3": "Japanese, Korean, Chinese for Asian languages",
+          "bullet4": "Thai for Thai script"
+        },
+        "color": {
+          "title": "Color Selection",
+          "text": "Choose a color that provides good contrast with your document content.",
+          "bullet1": "Light gray (#d3d3d3) for subtle watermarks",
+          "bullet2": "Black or dark colors for high contrast",
+          "bullet3": "Custom colors for branding purposes"
+        }
+      },
+      "file": {
+        "header": {
+          "title": "Image Upload"
+        },
+        "upload": {
+          "title": "Image Selection",
+          "text": "Upload an image file to use as your watermark.",
+          "bullet1": "Supports common formats: PNG, JPG, GIF, BMP",
+          "bullet2": "PNG with transparency works best",
+          "bullet3": "Higher resolution images maintain quality better"
+        },
+        "recommendations": {
+          "title": "Best Practices",
+          "text": "Tips for optimal image watermark results.",
+          "bullet1": "Use logos or stamps with transparent backgrounds",
+          "bullet2": "Simple designs work better than complex images",
+          "bullet3": "Consider the final document size when choosing resolution"
+        }
+      },
+      "formatting": {
+        "header": {
+          "title": "Formatting & Layout"
+        },
+        "appearance": {
+          "title": "Appearance Settings",
+          "text": "Control how your watermark looks and blends with the document.",
+          "bullet1": "Rotation: -360° to 360° for angled watermarks",
+          "bullet2": "Opacity: 0-100% for transparency control",
+          "bullet3": "Lower opacity creates subtle watermarks"
+        },
+        "spacing": {
+          "title": "Spacing Control",
+          "text": "Adjust the spacing between repeated watermarks across the page.",
+          "bullet1": "Horizontal spacing: Distance between watermarks left to right",
+          "bullet2": "Vertical spacing: Distance between watermarks top to bottom",
+          "bullet3": "Higher values create more spread out patterns"
+        },
+        "security": {
+          "title": "Security Option",
+          "text": "Flatten PDF pages to images for enhanced security.",
+          "bullet1": "Prevents text selection and copying",
+          "bullet2": "Makes watermarks harder to remove",
+          "bullet3": "Results in larger file sizes",
+          "bullet4": "Best for sensitive or copyrighted content"
+        }
+      },
       "advanced": {
         "header": {
           "title": "Advanced Options"
diff --git a/frontend/src/components/tools/addWatermark/WatermarkContentSettings.tsx b/frontend/src/components/tools/addWatermark/WatermarkContentSettings.tsx
deleted file mode 100644
index 5bab1ab83..000000000
--- a/frontend/src/components/tools/addWatermark/WatermarkContentSettings.tsx
+++ /dev/null
@@ -1,93 +0,0 @@
-import React, { useRef } from "react";
-import { Stack, Text, TextInput, FileButton, Button, NumberInput, Select, ColorInput } from "@mantine/core";
-import { useTranslation } from "react-i18next";
-import { AddWatermarkParameters } from "./types";
-
-interface WatermarkContentSettingsProps {
-  parameters: AddWatermarkParameters;
-  onParameterChange: (key: keyof AddWatermarkParameters, value: any) => void;
-  disabled?: boolean;
-}
-
-const WatermarkContentSettings = ({ parameters, onParameterChange, disabled = false }: WatermarkContentSettingsProps) => {
-  const { t } = useTranslation();
-  const resetRef = useRef<() => void>(null);
-
-  const alphabetOptions = [
-    { value: 'roman', label: t('watermark.alphabet.roman', 'Roman/Latin') },
-    { value: 'arabic', label: t('watermark.alphabet.arabic', 'Arabic') },
-    { value: 'japanese', label: t('watermark.alphabet.japanese', 'Japanese') },
-    { value: 'korean', label: t('watermark.alphabet.korean', 'Korean') },
-    { value: 'chinese', label: t('watermark.alphabet.chinese', 'Chinese') },
-    { value: 'thai', label: t('watermark.alphabet.thai', 'Thai') }
-  ];
-
-  return (
-    <Stack gap="md">
-      {/* Text Watermark Settings */}
-      {parameters.watermarkType === 'text' && (
-        <Stack gap="sm">
-          <Text size="sm" fw={500}>{t('watermark.settings.text.label', 'Watermark Text')}</Text>
-          <TextInput
-            placeholder={t('watermark.settings.text.placeholder', 'Enter watermark text')}
-            value={parameters.watermarkText}
-            onChange={(e) => onParameterChange('watermarkText', e.target.value)}
-            disabled={disabled}
-          />
-          
-          <Text size="sm" fw={500}>{t('watermark.settings.fontSize', 'Font Size')}</Text>
-          <NumberInput
-            value={parameters.fontSize}
-            onChange={(value) => onParameterChange('fontSize', value || 12)}
-            min={8}
-            max={72}
-            disabled={disabled}
-          />
-
-          <Text size="sm" fw={500}>{t('watermark.settings.alphabet', 'Font/Language')}</Text>
-          <Select
-            value={parameters.alphabet}
-            onChange={(value) => value && onParameterChange('alphabet', value)}
-            data={alphabetOptions}
-            disabled={disabled}
-          />
-
-          <Text size="sm" fw={500}>{t('watermark.settings.color', 'Watermark Color')}</Text>
-          <ColorInput
-            value={parameters.customColor}
-            onChange={(value) => onParameterChange('customColor', value)}
-            disabled={disabled}
-            format="hex"
-            swatches={['#d3d3d3', '#000000', '#ffffff', '#ff0000', '#00ff00', '#0000ff', '#ffff00', '#ff00ff', '#00ffff']}
-          />
-        </Stack>
-      )}
-
-      {/* Image Watermark Settings */}
-      {parameters.watermarkType === 'image' && (
-        <Stack gap="sm">
-          <Text size="sm" fw={500}>{t('watermark.settings.image.label', 'Watermark Image')}</Text>
-          <FileButton
-            resetRef={resetRef}
-            onChange={(file) => onParameterChange('watermarkImage', file)}
-            accept="image/*"
-            disabled={disabled}
-          >
-            {(props) => (
-              <Button {...props} variant="outline" fullWidth>
-                {parameters.watermarkImage ? parameters.watermarkImage.name : t('watermark.settings.image.choose', 'Choose Image')}
-              </Button>
-            )}
-          </FileButton>
-          {parameters.watermarkImage && (
-            <Text size="xs" c="dimmed">
-              {t('watermark.settings.image.selected', 'Selected: {{filename}}', { filename: parameters.watermarkImage.name })}
-            </Text>
-          )}
-        </Stack>
-      )}
-    </Stack>
-  );
-};
-
-export default WatermarkContentSettings;
\ No newline at end of file
diff --git a/frontend/src/components/tools/addWatermark/WatermarkFile.tsx b/frontend/src/components/tools/addWatermark/WatermarkFile.tsx
new file mode 100644
index 000000000..8aa27f28b
--- /dev/null
+++ b/frontend/src/components/tools/addWatermark/WatermarkFile.tsx
@@ -0,0 +1,34 @@
+import React, { useRef } from "react";
+import { Stack, Text, FileButton, Button } from "@mantine/core";
+import { useTranslation } from "react-i18next";
+import { AddWatermarkParameters } from "./types";
+
+interface WatermarkFileProps {
+  parameters: AddWatermarkParameters;
+  onParameterChange: (key: keyof AddWatermarkParameters, value: any) => void;
+  disabled?: boolean;
+}
+
+const WatermarkFile = ({ parameters, onParameterChange, disabled = false }: WatermarkFileProps) => {
+  const { t } = useTranslation();
+  const resetRef = useRef<() => void>(null);
+
+  return (
+    <Stack gap="sm">
+      <FileButton
+        resetRef={resetRef}
+        onChange={(file) => onParameterChange('watermarkImage', file)}
+        accept="image/*"
+        disabled={disabled}
+      >
+        {(props) => (
+          <Button {...props} variant="outline" fullWidth>
+            {parameters.watermarkImage ? parameters.watermarkImage.name : t('watermark.settings.image.choose', 'Choose Image')}
+          </Button>
+        )}
+      </FileButton>
+    </Stack>
+  );
+};
+
+export default WatermarkFile;
diff --git a/frontend/src/components/tools/addWatermark/WatermarkFormatting.tsx b/frontend/src/components/tools/addWatermark/WatermarkFormatting.tsx
new file mode 100644
index 000000000..42e382559
--- /dev/null
+++ b/frontend/src/components/tools/addWatermark/WatermarkFormatting.tsx
@@ -0,0 +1,73 @@
+import React from "react";
+import { Stack, Checkbox, Group } from "@mantine/core";
+import { useTranslation } from "react-i18next";
+import { AddWatermarkParameters } from "./types";
+import NumberInputWithUnit from "../shared/NumberInputWithUnit";
+
+interface WatermarkFormattingProps {
+  parameters: AddWatermarkParameters;
+  onParameterChange: (key: keyof AddWatermarkParameters, value: any) => void;
+  disabled?: boolean;
+}
+
+const WatermarkFormatting = ({ parameters, onParameterChange, disabled = false }: WatermarkFormattingProps) => {
+  const { t } = useTranslation();
+
+  return (
+    <Stack gap="md">
+      {/* Position & Appearance - 2 per row */}
+      <Group grow align="flex-start">
+        <NumberInputWithUnit
+          label={t('watermark.settings.rotation', 'Rotation')}
+          value={parameters.rotation}
+          onChange={(value) => onParameterChange('rotation', typeof value === 'number' ? value : 0)}
+          unit="°"
+          min={-360}
+          max={360}
+          disabled={disabled}
+        />
+        <NumberInputWithUnit
+          label={t('watermark.settings.opacity', 'Opacity')}
+          value={parameters.opacity}
+          onChange={(value) => onParameterChange('opacity', typeof value === 'number' ? value : 50)}
+          unit="%"
+          min={0}
+          max={100}
+          disabled={disabled}
+        />
+      </Group>
+
+      {/* Spacing - 2 per row */}
+      <Group grow align="flex-start">
+        <NumberInputWithUnit
+          label={t('watermark.settings.spacing.horizontal', 'Horizontal Spacing')}
+          value={parameters.widthSpacer}
+          onChange={(value) => onParameterChange('widthSpacer', typeof value === 'number' ? value : 50)}
+          unit="px"
+          min={0}
+          max={200}
+          disabled={disabled}
+        />
+        <NumberInputWithUnit
+          label={t('watermark.settings.spacing.vertical', 'Vertical Spacing')}
+          value={parameters.heightSpacer}
+          onChange={(value) => onParameterChange('heightSpacer', typeof value === 'number' ? value : 50)}
+          unit="px"
+          min={0}
+          max={200}
+          disabled={disabled}
+        />
+      </Group>
+
+      {/* Advanced Options */}
+      <Checkbox
+        label={t('watermark.settings.convertToImage', 'Flatten PDF pages to images')}
+        checked={parameters.convertPDFToImage}
+        onChange={(event) => onParameterChange('convertPDFToImage', event.currentTarget.checked)}
+        disabled={disabled}
+      />
+    </Stack>
+  );
+};
+
+export default WatermarkFormatting;
\ No newline at end of file
diff --git a/frontend/src/components/tools/addWatermark/WatermarkTextStyle.tsx b/frontend/src/components/tools/addWatermark/WatermarkTextStyle.tsx
new file mode 100644
index 000000000..519ce1581
--- /dev/null
+++ b/frontend/src/components/tools/addWatermark/WatermarkTextStyle.tsx
@@ -0,0 +1,65 @@
+import React from "react";
+import { Stack, Text, Select, ColorInput, NumberInput, Group } from "@mantine/core";
+import { useTranslation } from "react-i18next";
+import { AddWatermarkParameters } from "./types";
+
+interface WatermarkTextStyleProps {
+  parameters: AddWatermarkParameters;
+  onParameterChange: (key: keyof AddWatermarkParameters, value: any) => void;
+  disabled?: boolean;
+}
+
+const WatermarkTextStyle = ({ parameters, onParameterChange, disabled = false }: WatermarkTextStyleProps) => {
+  const { t } = useTranslation();
+
+  const alphabetOptions = [
+    { value: "roman", label: "Roman" },
+    { value: "arabic", label: "العربية" },
+    { value: "japanese", label: "日本語" },
+    { value: "korean", label: "한국어" },
+    { value: "chinese", label: "简体中文" },
+    { value: "thai", label: "ไทย" },
+  ];
+
+  return (
+    <Stack gap="sm">
+      <Group align="flex-start">
+        <Stack gap="xs" style={{ flex: 1 }}>
+          <Text size="xs" fw={500}>
+            {t("watermark.settings.color", "Colour")}
+          </Text>
+          <ColorInput
+            value={parameters.customColor}
+            onChange={(value) => onParameterChange("customColor", value)}
+            disabled={disabled}
+            format="hex"
+          />
+        </Stack>
+
+        <Stack gap="xs" style={{ flex: 0.5 }}>
+          <Text size="xs" fw={500}>
+            {t("watermark.settings.fontSize", "Size")}
+          </Text>
+          <NumberInput
+            value={parameters.fontSize}
+            onChange={(value) => onParameterChange("fontSize", value || 12)}
+            min={8}
+            max={72}
+            disabled={disabled}
+          />
+        </Stack>
+      </Group>
+      <Text size="xs" fw={500}>
+        {t("watermark.settings.alphabet", "Alphabet")}
+      </Text>
+      <Select
+        value={parameters.alphabet}
+        onChange={(value) => value && onParameterChange("alphabet", value)}
+        data={alphabetOptions}
+        disabled={disabled}
+      />
+    </Stack>
+  );
+};
+
+export default WatermarkTextStyle;
diff --git a/frontend/src/components/tools/addWatermark/WatermarkTypeSettings.tsx b/frontend/src/components/tools/addWatermark/WatermarkTypeSettings.tsx
index 438d781a6..f97454c5c 100644
--- a/frontend/src/components/tools/addWatermark/WatermarkTypeSettings.tsx
+++ b/frontend/src/components/tools/addWatermark/WatermarkTypeSettings.tsx
@@ -13,7 +13,6 @@ const WatermarkTypeSettings = ({ watermarkType, onWatermarkTypeChange, disabled
 
   return (
     <Stack gap="sm">
-      <Text size="sm" fw={500}>{t('watermark.settings.type', 'Watermark Type')}</Text>
       <div style={{ display: 'flex', gap: '4px' }}>
         <Button
           variant={watermarkType === 'text' ? 'filled' : 'outline'}
@@ -42,4 +41,4 @@ const WatermarkTypeSettings = ({ watermarkType, onWatermarkTypeChange, disabled
   );
 };
 
-export default WatermarkTypeSettings;
\ No newline at end of file
+export default WatermarkTypeSettings;
diff --git a/frontend/src/components/tools/addWatermark/WatermarkWording.tsx b/frontend/src/components/tools/addWatermark/WatermarkWording.tsx
new file mode 100644
index 000000000..7322f2781
--- /dev/null
+++ b/frontend/src/components/tools/addWatermark/WatermarkWording.tsx
@@ -0,0 +1,27 @@
+import React from "react";
+import { Stack, Text, TextInput } from "@mantine/core";
+import { useTranslation } from "react-i18next";
+import { AddWatermarkParameters } from "./types";
+
+interface WatermarkWordingProps {
+  parameters: AddWatermarkParameters;
+  onParameterChange: (key: keyof AddWatermarkParameters, value: any) => void;
+  disabled?: boolean;
+}
+
+const WatermarkWording = ({ parameters, onParameterChange, disabled = false }: WatermarkWordingProps) => {
+  const { t } = useTranslation();
+
+  return (
+    <Stack gap="sm">
+      <TextInput
+        placeholder={t('watermark.settings.text.placeholder', 'Enter watermark text')}
+        value={parameters.watermarkText}
+        onChange={(e) => onParameterChange('watermarkText', e.target.value)}
+        disabled={disabled}
+      />
+    </Stack>
+  );
+};
+
+export default WatermarkWording;
diff --git a/frontend/src/components/tools/shared/NumberInputWithUnit.tsx b/frontend/src/components/tools/shared/NumberInputWithUnit.tsx
new file mode 100644
index 000000000..207a19af3
--- /dev/null
+++ b/frontend/src/components/tools/shared/NumberInputWithUnit.tsx
@@ -0,0 +1,50 @@
+import React from "react";
+import { Stack, Text, NumberInput } from "@mantine/core";
+
+interface NumberInputWithUnitProps {
+  label: string;
+  value: number;
+  onChange: (value: number | string) => void;
+  unit: string;
+  min?: number;
+  max?: number;
+  disabled?: boolean;
+}
+
+const NumberInputWithUnit = ({ 
+  label, 
+  value, 
+  onChange, 
+  unit, 
+  min, 
+  max, 
+  disabled = false 
+}: NumberInputWithUnitProps) => {
+  return (
+    <Stack gap="xs" style={{ flex: 1 }}>
+      <Text size="xs" fw={500} style={{ whiteSpace: 'nowrap', overflow: 'hidden', textOverflow: 'ellipsis' }}>
+        {label}
+      </Text>
+      <NumberInput
+        value={value}
+        onChange={onChange}
+        min={min}
+        max={max}
+        disabled={disabled}
+        rightSection={
+          <Text size="sm" c="dimmed" pr="sm">
+            {unit}
+          </Text>
+        }
+        rightSectionWidth={unit.length * 8 + 20} // Dynamic width based on unit length
+        styles={{
+          rightSection: {
+            pointerEvents: 'none',
+          }
+        }}
+      />
+    </Stack>
+  );
+};
+
+export default NumberInputWithUnit;
\ No newline at end of file
diff --git a/frontend/src/components/tooltips/useWatermarkTips.ts b/frontend/src/components/tooltips/useWatermarkTips.ts
index 408d5de2f..675d56d52 100644
--- a/frontend/src/components/tooltips/useWatermarkTips.ts
+++ b/frontend/src/components/tooltips/useWatermarkTips.ts
@@ -97,27 +97,132 @@ export const useWatermarkStyleTips = (): TooltipContent => {
   };
 };
 
-export const useWatermarkAdvancedTips = (): TooltipContent => {
+export const useWatermarkWordingTips = (): TooltipContent => {
   const { t } = useTranslation();
 
   return {
     header: {
-      title: t("watermark.tooltip.advanced.header.title", "Advanced Options")
+      title: t("watermark.tooltip.wording.header.title", "Text Content")
     },
     tips: [
       {
-        title: t("watermark.tooltip.advanced.conversion.title", "PDF to Image Conversion"),
-        description: t("watermark.tooltip.advanced.conversion.text", "Convert the final PDF to an image-based format for enhanced security."),
+        title: t("watermark.tooltip.wording.text.title", "Watermark Text"),
+        description: t("watermark.tooltip.wording.text.text", "Enter the text that will appear as your watermark across the document."),
         bullets: [
-          t("watermark.tooltip.advanced.conversion.bullet1", "Prevents text selection and copying"),
-          t("watermark.tooltip.advanced.conversion.bullet2", "Makes watermarks harder to remove"),
-          t("watermark.tooltip.advanced.conversion.bullet3", "Results in larger file sizes"),
-          t("watermark.tooltip.advanced.conversion.bullet4", "Best for sensitive or copyrighted content")
+          t("watermark.tooltip.wording.text.bullet1", "Keep it concise for better readability"),
+          t("watermark.tooltip.wording.text.bullet2", "Common examples: 'CONFIDENTIAL', 'DRAFT', company name"),
+          t("watermark.tooltip.wording.text.bullet3", "Supports all Unicode characters")
         ]
       },
       {
-        title: t("watermark.tooltip.advanced.security.title", "Security Considerations"),
-        description: t("watermark.tooltip.advanced.security.text", "Image-based PDFs provide additional protection against unauthorized editing and content extraction.")
+        title: t("watermark.tooltip.wording.fontSize.title", "Font Size"),
+        description: t("watermark.tooltip.wording.fontSize.text", "Control the size of your watermark text (8-72 points)."),
+        bullets: [
+          t("watermark.tooltip.wording.fontSize.bullet1", "Smaller sizes (8-14pt) for subtle watermarks"),
+          t("watermark.tooltip.wording.fontSize.bullet2", "Medium sizes (16-24pt) for standard visibility"),
+          t("watermark.tooltip.wording.fontSize.bullet3", "Large sizes (30-72pt) for prominent watermarks")
+        ]
+      }
+    ]
+  };
+};
+
+export const useWatermarkTextStyleTips = (): TooltipContent => {
+  const { t } = useTranslation();
+
+  return {
+    header: {
+      title: t("watermark.tooltip.textStyle.header.title", "Text Style")
+    },
+    tips: [
+      {
+        title: t("watermark.tooltip.textStyle.language.title", "Language Support"),
+        description: t("watermark.tooltip.textStyle.language.text", "Choose the appropriate language setting to ensure proper font rendering."),
+        bullets: [
+          t("watermark.tooltip.textStyle.language.bullet1", "Roman/Latin for Western languages"),
+          t("watermark.tooltip.textStyle.language.bullet2", "Arabic for Arabic script"),
+          t("watermark.tooltip.textStyle.language.bullet3", "Japanese, Korean, Chinese for Asian languages"),
+          t("watermark.tooltip.textStyle.language.bullet4", "Thai for Thai script")
+        ]
+      },
+      {
+        title: t("watermark.tooltip.textStyle.color.title", "Color Selection"),
+        description: t("watermark.tooltip.textStyle.color.text", "Choose a color that provides good contrast with your document content."),
+        bullets: [
+          t("watermark.tooltip.textStyle.color.bullet1", "Light gray (#d3d3d3) for subtle watermarks"),
+          t("watermark.tooltip.textStyle.color.bullet2", "Black or dark colors for high contrast"),
+          t("watermark.tooltip.textStyle.color.bullet3", "Custom colors for branding purposes")
+        ]
+      }
+    ]
+  };
+};
+
+export const useWatermarkFileTips = (): TooltipContent => {
+  const { t } = useTranslation();
+
+  return {
+    header: {
+      title: t("watermark.tooltip.file.header.title", "Image Upload")
+    },
+    tips: [
+      {
+        title: t("watermark.tooltip.file.upload.title", "Image Selection"),
+        description: t("watermark.tooltip.file.upload.text", "Upload an image file to use as your watermark."),
+        bullets: [
+          t("watermark.tooltip.file.upload.bullet1", "Supports common formats: PNG, JPG, GIF, BMP"),
+          t("watermark.tooltip.file.upload.bullet2", "PNG with transparency works best"),
+          t("watermark.tooltip.file.upload.bullet3", "Higher resolution images maintain quality better")
+        ]
+      },
+      {
+        title: t("watermark.tooltip.file.recommendations.title", "Best Practices"),
+        description: t("watermark.tooltip.file.recommendations.text", "Tips for optimal image watermark results."),
+        bullets: [
+          t("watermark.tooltip.file.recommendations.bullet1", "Use logos or stamps with transparent backgrounds"),
+          t("watermark.tooltip.file.recommendations.bullet2", "Simple designs work better than complex images"),
+          t("watermark.tooltip.file.recommendations.bullet3", "Consider the final document size when choosing resolution")
+        ]
+      }
+    ]
+  };
+};
+
+export const useWatermarkFormattingTips = (): TooltipContent => {
+  const { t } = useTranslation();
+
+  return {
+    header: {
+      title: t("watermark.tooltip.formatting.header.title", "Formatting & Layout")
+    },
+    tips: [
+      {
+        title: t("watermark.tooltip.formatting.appearance.title", "Appearance Settings"),
+        description: t("watermark.tooltip.formatting.appearance.text", "Control how your watermark looks and blends with the document."),
+        bullets: [
+          t("watermark.tooltip.formatting.appearance.bullet1", "Rotation: -360° to 360° for angled watermarks"),
+          t("watermark.tooltip.formatting.appearance.bullet2", "Opacity: 0-100% for transparency control"),
+          t("watermark.tooltip.formatting.appearance.bullet3", "Lower opacity creates subtle watermarks")
+        ]
+      },
+      {
+        title: t("watermark.tooltip.formatting.spacing.title", "Spacing Control"),
+        description: t("watermark.tooltip.formatting.spacing.text", "Adjust the spacing between repeated watermarks across the page."),
+        bullets: [
+          t("watermark.tooltip.formatting.spacing.bullet1", "Width spacing: Horizontal distance between watermarks"),
+          t("watermark.tooltip.formatting.spacing.bullet2", "Height spacing: Vertical distance between watermarks"),
+          t("watermark.tooltip.formatting.spacing.bullet3", "Higher values create more spread out patterns")
+        ]
+      },
+      {
+        title: t("watermark.tooltip.formatting.security.title", "Security Option"),
+        description: t("watermark.tooltip.formatting.security.text", "Convert the final PDF to an image-based format for enhanced security."),
+        bullets: [
+          t("watermark.tooltip.formatting.security.bullet1", "Prevents text selection and copying"),
+          t("watermark.tooltip.formatting.security.bullet2", "Makes watermarks harder to remove"),
+          t("watermark.tooltip.formatting.security.bullet3", "Results in larger file sizes"),
+          t("watermark.tooltip.formatting.security.bullet4", "Best for sensitive or copyrighted content")
+        ]
       }
     ]
   };
diff --git a/frontend/src/tools/AddWatermark.tsx b/frontend/src/tools/AddWatermark.tsx
index 1e30f948e..57cff6f59 100644
--- a/frontend/src/tools/AddWatermark.tsx
+++ b/frontend/src/tools/AddWatermark.tsx
@@ -7,13 +7,14 @@ import { useToolFileSelection } from "../contexts/FileSelectionContext";
 import { createToolFlow } from "../components/tools/shared/createToolFlow";
 
 import WatermarkTypeSettings from "../components/tools/addWatermark/WatermarkTypeSettings";
-import WatermarkContentSettings from "../components/tools/addWatermark/WatermarkContentSettings";
-import WatermarkStyleSettings from "../components/tools/addWatermark/WatermarkStyleSettings";
-import WatermarkAdvancedSettings from "../components/tools/addWatermark/WatermarkAdvancedSettings";
+import WatermarkWording from "../components/tools/addWatermark/WatermarkWording";
+import WatermarkTextStyle from "../components/tools/addWatermark/WatermarkTextStyle";
+import WatermarkFile from "../components/tools/addWatermark/WatermarkFile";
+import WatermarkFormatting from "../components/tools/addWatermark/WatermarkFormatting";
 
 import { useAddWatermarkParameters } from "../hooks/tools/addWatermark/useAddWatermarkParameters";
 import { useAddWatermarkOperation } from "../hooks/tools/addWatermark/useAddWatermarkOperation";
-import { useWatermarkTypeTips, useWatermarkContentTips, useWatermarkStyleTips, useWatermarkAdvancedTips } from "../components/tooltips/useWatermarkTips";
+import { useWatermarkTypeTips, useWatermarkWordingTips, useWatermarkTextStyleTips, useWatermarkFileTips, useWatermarkFormattingTips } from "../components/tooltips/useWatermarkTips";
 import { BaseToolProps } from "../types/tool";
 
 const AddWatermark = ({ onPreviewFile, onComplete, onError }: BaseToolProps) => {
@@ -28,9 +29,10 @@ const AddWatermark = ({ onPreviewFile, onComplete, onError }: BaseToolProps) =>
   const watermarkParams = useAddWatermarkParameters();
   const watermarkOperation = useAddWatermarkOperation();
   const watermarkTypeTips = useWatermarkTypeTips();
-  const watermarkContentTips = useWatermarkContentTips();
-  const watermarkStyleTips = useWatermarkStyleTips();
-  const watermarkAdvancedTips = useWatermarkAdvancedTips();
+  const watermarkWordingTips = useWatermarkWordingTips();
+  const watermarkTextStyleTips = useWatermarkTextStyleTips();
+  const watermarkFileTips = useWatermarkFileTips();
+  const watermarkFormattingTips = useWatermarkFormattingTips();
 
   // Endpoint validation
   const { enabled: endpointEnabled, loading: endpointLoading } = useEndpointEnabled("add-watermark");
@@ -78,24 +80,22 @@ const AddWatermark = ({ onPreviewFile, onComplete, onError }: BaseToolProps) =>
 
   // Step completion logic
   const typeStepCompleted = hasFiles && !!watermarkParams.parameters.watermarkType;
-  const contentStepCompleted = typeStepCompleted && (
-    (watermarkParams.parameters.watermarkType === 'text' && watermarkParams.parameters.watermarkText.trim().length > 0) ||
-    (watermarkParams.parameters.watermarkType === 'image' && watermarkParams.parameters.watermarkImage !== undefined)
-  );
+  const textWordingCompleted = typeStepCompleted &&
+    watermarkParams.parameters.watermarkType === 'text' &&
+    watermarkParams.parameters.watermarkText.trim().length > 0;
+  const imageFileCompleted = typeStepCompleted &&
+    watermarkParams.parameters.watermarkType === 'image' &&
+    watermarkParams.parameters.watermarkImage !== undefined;
 
-  // Step visibility logic - all steps always visible once files are selected
-  const styleCollapsed = collapsedStyle || hasResults;
-  const advancedCollapsed = collapsedAdvanced || hasResults;
+  // Dynamic step structure based on watermark type
+  const getSteps = () => {
+    const steps = [];
 
-  return createToolFlow({
-    files: {
-      selectedFiles,
-      isCollapsed: hasFiles || hasResults,
-    },
-    steps: [
-      {
+    // Step 1: Watermark Type (always visible after files)
+    if (hasFiles) {
+      steps.push({
         title: t("watermark.steps.type", "Watermark Type"),
-        isCollapsed: settingsCollapsed? true : collapsedType,
+        isCollapsed: hasResults ? true : collapsedType,
         onCollapsedClick: hasResults ? handleSettingsReset : () => setCollapsedType(!collapsedType),
         tooltip: watermarkTypeTips,
         content: (
@@ -105,48 +105,97 @@ const AddWatermark = ({ onPreviewFile, onComplete, onError }: BaseToolProps) =>
             disabled={endpointLoading}
           />
         ),
-      },
-      {
-        title: watermarkParams.parameters.watermarkType === 'text'
-          ? t("watermark.steps.textContent", "Text Content")
-          : t("watermark.steps.imageContent", "Image Content"),
-        isCollapsed: settingsCollapsed? true : contentStepCompleted,
-        tooltip: watermarkContentTips,
+      });
+    }
+
+    // Text watermark path
+    if (watermarkParams.parameters.watermarkType === 'text') {
+      // Step 2: Wording
+      steps.push({
+        title: t("watermark.steps.wording", "Wording"),
+        isCollapsed: hasResults,
+        tooltip: watermarkWordingTips,
         content: (
-          <WatermarkContentSettings
+          <WatermarkWording
             parameters={watermarkParams.parameters}
             onParameterChange={watermarkParams.updateParameter}
             disabled={endpointLoading}
           />
         ),
-      },
-      {
-        title: t("watermark.steps.style", "Style & Position"),
-        isCollapsed: settingsCollapsed? true : styleCollapsed,
+      });
+
+      // Step 3: Style
+      steps.push({
+        title: t("watermark.steps.textStyle", "Style"),
+        isCollapsed: hasResults ? true : collapsedStyle,
         onCollapsedClick: hasResults ? handleSettingsReset : () => setCollapsedStyle(!collapsedStyle),
-        tooltip: watermarkStyleTips,
+        tooltip: watermarkTextStyleTips,
         content: (
-          <WatermarkStyleSettings
+          <WatermarkTextStyle
             parameters={watermarkParams.parameters}
             onParameterChange={watermarkParams.updateParameter}
             disabled={endpointLoading}
           />
         ),
-      },
-      {
-        title: t("watermark.steps.advanced", "Advanced Options"),
-        isCollapsed: settingsCollapsed? true : advancedCollapsed,
+      });
+
+      // Step 4: Formatting
+      steps.push({
+        title: t("watermark.steps.formatting", "Formatting"),
+        isCollapsed: hasResults ? true : collapsedAdvanced,
         onCollapsedClick: hasResults ? handleSettingsReset : () => setCollapsedAdvanced(!collapsedAdvanced),
-        tooltip: watermarkAdvancedTips,
+        tooltip: watermarkFormattingTips,
         content: (
-          <WatermarkAdvancedSettings
+          <WatermarkFormatting
             parameters={watermarkParams.parameters}
             onParameterChange={watermarkParams.updateParameter}
             disabled={endpointLoading}
           />
         ),
-      },
-    ],
+      });
+    }
+
+    // Image watermark path
+    if (watermarkParams.parameters.watermarkType === 'image') {
+      // Step 2: Watermark File
+      steps.push({
+        title: t("watermark.steps.file", "Watermark File"),
+        isCollapsed: false,
+        tooltip: watermarkFileTips,
+        content: (
+          <WatermarkFile
+            parameters={watermarkParams.parameters}
+            onParameterChange={watermarkParams.updateParameter}
+            disabled={endpointLoading}
+          />
+        ),
+      });
+
+      // Step 3: Formatting
+      steps.push({
+        title: t("watermark.steps.formatting", "Formatting"),
+        isCollapsed: hasResults ? true : collapsedAdvanced,
+        onCollapsedClick: hasResults ? handleSettingsReset : () => setCollapsedAdvanced(!collapsedAdvanced),
+        tooltip: watermarkFormattingTips,
+        content: (
+          <WatermarkFormatting
+            parameters={watermarkParams.parameters}
+            onParameterChange={watermarkParams.updateParameter}
+            disabled={endpointLoading}
+          />
+        ),
+      });
+    }
+
+    return steps;
+  };
+
+  return createToolFlow({
+    files: {
+      selectedFiles,
+      isCollapsed: hasFiles || hasResults,
+    },
+    steps: getSteps(),
     executeButton: {
       text: t("watermark.submit", "Add Watermark"),
       isVisible: !hasResults,