PRESS RELEASE

Willis Towers Watson Reports Strong Third Quarter 2018 Earnings

By
Monday, November 5, 2018

Press release by Willis Towers Watson

ARLINGTON, Va. and LONDON, Nov. 02, 2018 (GLOBE NEWSWIRE) -- Willis Towers Watson (NASDAQ: WLTW) (the "Company"), a leading global advisory, broking and solutions company, today announced financial results for the third quarter of 2018, which ended September 30, 2018.

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As of January 1, 2018, the Company adopted Accounting Standards Codification 606, Revenue From Contracts With Customers ("ASC 606"). The adoption of this new pronouncement had a material impact to the timing, amounts and classifications of certain results and balances within our condensed consolidated financial statements in 2018. As we move past the adoption year, the full year financial results will generally be more comparable to the 2017 reported results.

As required by ASC 606, under the modified retrospective method of adoption, the Company has provided the impact to the affected line items within the condensed consolidated financial statements for 2018. The 2017 comparative financial line items have not been restated in accordance with the new standard. In an effort to allow the reader to better understand the impact this guidance had on our reported results, we have also included our 2018 results, without the adoption effects of ASC 606, as supplemental information.

The Company also adopted ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost which became effective January 1, 2018 and has been applied retrospectively. As a result of the adoption, the current service-cost component for postretirement benefit cost will remain in Salaries and Benefits and the other components will be included in the Other income, net line.

Excluding the Revenue Standard

Without the impact of ASC 606, revenue for the three months ended September 30, 2018 was $1.9 billion, an increase of 3% (4% increase constant currency and 5% increase organic), as compared to $1.85 billion for the same period in the prior year.

For the nine months ended September 30, 2018, without the impact of ASC 606, revenue was $6.5 billion, an increase of 6% (3% increase constant currency and 4% increase organic), as compared to $6.1 billion for the same period in the prior year.

Net income attributable to Willis Towers Watson for the third quarter of 2018 was $83 million, a 254% increase from the net loss of $54 million for the prior-year third quarter. For the quarter, diluted earnings per share were $0.63, and adjusted diluted earnings per share were $1.62. Net income attributable to Willis Towers Watson and diluted earnings per share for the third quarter of 2018 include pre-tax $50 million of transaction and integration expenses. The U.S. GAAP tax rate for the quarter was 0% and the adjusted tax rate for the quarter used in calculating adjusted diluted earnings per share was 17%.

For the nine months ended September 30, 2018, net income attributable to Willis Towers Watson was $606 million, an 88% increase from $323 million for the same period in the prior year. Diluted earnings per share for the nine months ended September 30, 2018 were $4.58, and adjusted diluted earnings per share were $7.92. Net income attributable to Willis Towers Watson and diluted earnings per share for the nine months ended September 30, 2018 included pre-tax $148 million of transaction and integration expenses.

Net income for the third quarter of 2018 was $85 million, a 257% increase from the net loss of $54 million for the prior-year third quarter. Adjusted EBITDA for the third quarter of 2018 was $368 million, or 19.4% of revenue, as compared to Adjusted EBITDA of $322 million, or 17.4% of revenue, for the prior-year third quarter. This represents an increase of 200 basis points in Adjusted EBITDA margin over the prior-year third quarter.

For the nine months ended September 30, 2018, net income was $621 million, an increase from net income of $339 million for the same period in the prior year. Adjusted EBITDA for the nine months ended September 30, 2018 was $1.6 billion or 25.3% of revenue, an increase from Adjusted EBITDA of $1.4 billion, or 23.1% of revenue, for the same period in the prior year, representing an increase of 220 basis points in Adjusted EBITDA margin over the same period in the prior year.

"I'm extremely pleased with our third quarter results," said John Haley, Willis Towers Watson's chief executive officer. "Overall, our performance reflects strong organic revenue growth, continued margin expansion, and double-digit growth in our adjusted earnings per share and free cash flow. Our results indicate that we have made substantial progress toward our goals for 2018 and we expect a strong finish to the year as we head into one of our seasonally strongest quarters."

Including the Revenue Standard

With the impact of ASC 606, revenue was $1.9 billion for the quarter and $6.1 billion for the nine months ended September 30, 2018.

Net income attributable to Willis Towers Watson for the third quarter of 2018 was $44 million. For the quarter, diluted earnings per share were $0.33, and adjusted diluted earnings per share were $1.32. Net income attributable to Willis Towers Watson and diluted earnings per share for the third quarter of 2018 include pre-tax $50 million of transaction and integration expenses. The U.S. GAAP tax rate for the quarter was negative 28% and the adjusted tax rate for the quarter used in calculating adjusted diluted earnings per share was 16%.

For the nine months ended September 30, 2018, net income attributable to Willis Towers Watson was $317 million. Diluted earnings per share for the nine months ended September 30, 2018 were $2.39, and adjusted diluted earnings per share were $5.74. Net income attributable to Willis Towers Watson and diluted earnings per share for the nine months ended September 30, 2018 included pre-tax $148 million of transaction and integration expenses.

Net income for the third quarter of 2018 was $46 million. Adjusted EBITDA for the third quarter of 2018 was $313 million, or 16.8% of revenue.

For the nine months ended September 30, 2018, net income was $332 million. Adjusted EBITDA for the nine months ended September 30, 2018 was $1.3 billion, or 20.6% of revenue.

Free cash flow for the nine months ended September 30, 2018and 2017 was $507 million and $317 million, respectively, a 60% increase.

The Company repurchased approximately $132 million of Willis Towers Watson stock during the third quarter of 2018.