WTW Q3 Earnings Top on Higher Revenues, Transformation Program

Core Insights - Willis Towers Watson (WTW) reported third-quarter 2024 adjusted earnings of $2.93 per share, exceeding the Zacks Consensus Estimate by 9.3% and reflecting a year-over-year increase of 30.8% [1] - The strong performance was driven by revenue growth in the Health, Wealth & Career, and Risk & Broking segments, alongside an expanded margin, despite increased expenses [1] Operational Update - Adjusted consolidated revenues reached $2.3 billion, marking a 5.5% year-over-year increase, and beating the Zacks Consensus Estimate by 0.4% [3] - Total service costs rose 52.2% year over year to $3.1 billion, influenced by impairments and higher salaries [3] - Adjusted operating income was $414 million, an 18% increase year over year, with a margin expansion of 190 basis points to 18.1% [4] - Adjusted EBITDA was $501 million, up 15% year over year, with a margin increase of 180 basis points to 20.6% [4] Quarterly Segment Update - Health, Wealth & Career segment revenues totaled $1.3 billion, a 4% year-over-year increase, matching estimates [5] - Organic revenue growth in Health was supported by strong client retention and expanded Global Benefits Management [5] - Wealth businesses saw organic growth due to increased Retirement work in Europe and improvements in the Investments business [6] - Career segment growth was driven by higher compensation survey sales and advisory services [6] - Benefits Delivery & Outsourcing (BD&O) experienced an organic revenue decline due to moderating growth in Individual Marketplace [7] - Risk & Broking segment revenues were $940 million, a 10% year-over-year increase, surpassing estimates [8] - Corporate Risk & Broking (CRB) saw organic growth from new business activity and strong client retention [8] - Insurance Consulting and Technology (ICT) reported organic growth driven by strong software sales [9] Financial Update - As of September 30, 2024, cash and cash equivalents were $1.4 billion, down 3.7% year over year [11] - Long-term debt increased 16.2% to $5.3 billion, while shareholders' equity decreased 21.3% to $7.5 billion [11] - Cash flow from operations was $913 million for the first nine months of 2024, a 10.9% increase from the prior year [11] - Free cash flow for the same period rose 14.1% to $807 million [11] - WTW repurchased shares worth $205 million in the third quarter [12] 2024 Outlook - WTW anticipates revenues exceeding $9.9 billion with mid-single-digit organic revenue growth for the full year [13] - The company projects an adjusted operating margin between 23-23.5% and adjusted earnings per share in the range of $16-$17 [13] - The Transformation Program is expected to yield annual cost savings of $450 million [13] - An estimated $88 million in non-cash pension income is expected, with a foreign currency headwind of approximately 6 cents on adjusted earnings per share [14]