Willis Towers Watson Public Limited Company · NASDAQ:WTW
Willis Towers Watson Public — Q3 2023 Earnings Presentation
30 slides from Willis Towers Watson Public's earnings presentation, Oct 26, 2023
Slide 1: Earnings Release Supplemental Materials: 2023 Third Quarter Financial Results
WTW Earnings Release Supplemental Materials 2023 Third Quarter Financial Results October 26, 2023 wtwco.com © 2023 WTW. All rights reserved.
Slide 2: WTW Forward-Looking Statements
WTW Forward-Looking Statements This document contains ‘forward-looking statements’ within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created by those laws. These forward-lookin
Slide 3: WTW Non-GAAP Measures
WTW Non-GAAP Measures In order to assist readers of our consolidated financial statements in understanding the core operating results that WTW’s management uses to evaluate the business and for financial planning, we present the following non-GAAP measures: (1) Constant Currency Change, (2) Organic
Slide 4: Key Takeaways
Key Takeaways Delivered strong organic growth1 of 9% in Q3-23 and +170 bps of adjusted operating margin1 expansion Continued to make significant progress on strategic priorities Realized $23M of incremental annualized savings in Q3-23, bringing the total to $300M since the Transformation Program inc
Slide 5: Q3 2023 GAAP Financial Results
Q3 2023 GAAP Financial Results Key figures $USD million, except EPS and % Three months ended Nine months ended September 30, September 30, 2023 2022 2023 2022 Revenue $2,166 $6,569 $1,953 $6,144 % change 11% 7% Income from Operations $159 $586 $154 $470 % change 3% 25% Operating Margin % 7.3% 8.9% 7
Slide 6: Q3 2023 Key Figures, Including Non-GAAP Financial Results
Q3 2023 Key Figures, Including Non-GAAP Financial Results Q3 2023 Results Total Revenue $2.2B +9% +6% Q3 2023 Q3 2023 Q3 2022 Organic1 Organic1 Adjusted Diluted EPS1 $2.24 +2% $2.20 Q3 2023 Q3 2023 Q3 2022 Adjusted Operating Margin1 16.2% +170 bps 14.5% Q3 2023 Q3 2023 Q3 2022 Free Cash Flow1 $707M
Slide 7: Financial Review
Financial Review wtwco.com © 2023 WTW. All rights reserved. See “WTW Forward-Looking Statements“ above for information about forward-looking statements and cautionary language, including how actual results may differ materially from those in the slide presentation. 7
Slide 8: Quarterly Segment Performance: Health, Wealth & Career
Quarterly Segment Performance: Health, Wealth & Career Segment Highlights Revenue ($M) Adjusted Operating • For the quarter, HWC had organic revenue growth 1 of 9%, with BD&O leading Margin the segment. $1,282 23.8% $1,162 20.3% – BD&O generated organic revenue growth driven by new clients and incre
Slide 9: Quarterly Segment Performance: Risk & Broking
Quarterly Segment Performance: Risk & Broking Segment Highlights Revenue ($M) Adjusted Operating • For the quarter, R&B had organic revenue growth 1 of 10%. Organic revenue Margin growth excluding the impact of book-of-business settlement revenue was $855 15.7% 12%. $765 13.7% – CRB generated solid
Slide 10: Continued Progress on Transformation Program
Continued Progress on Transformation Program On track to generate $380M of annualized savings through 2024 Cumulative Delivering on our financial commitments Q3-23 Total Costs to Achieve From YTD Transformation • Delivering $380M run-rate savings to ($ millions) Inception contribute 380 bps of margi
Slide 11: Maintaining a Flexible Balance Sheet
Maintaining a Flexible Balance Sheet Reinforcing our business fundamentals; safeguarding WTW’s financial strengths Disciplined capital management strategy Dec 31, 2022 Sept 30, 2023 Provides WTW with the financial flexibility to ($ millions) reinvest in our businesses, capitalize on market growth op
Slide 12: Executing Against a Balanced Capital Allocation Strategy
Executing Against a Balanced Capital Allocation Strategy Capital Allocation Priorities CASH RETURNED TO SHAREHOLDERS • Reinvest in capabilities, businesses, and processes • Invest in innovation, technology, and new business $10.3 B $2,001 $3,899 FY2016 to • Return excess cash to shareholders through
Slide 13: 2023 Financial Targets
2023 Financial Targets1 FY2023 Revenue Growth Expect to deliver mid-single digit organic revenue growth FY2023 Adjusted Margin Improvement Expect to deliver adjusted operating margin expansion for full year 2023 FY2023 Foreign Currency Expect approximately $0.07 headwind on Adj. EPS at today’s rates
Slide 14: Near-term FCF Margin Expectations
Near-term FCF Margin Expectations 2023 Free Cash Flow Margin1 2022 Non-Recurring FCF Headwinds 20% • ~$300M tax payments made on gains recorded in 2021 in connection with receipt of termination fee and divested treaty reinsurance business 15% 2% 14% -2% • ~$150M realized losses on foreign currency h
Slide 15: Strategy and Operating Performance
Strategy and Operating Performance wtwco.com © 2023 WTW. All rights reserved. See “WTW Forward-Looking Statements“ above for information about forward-looking statements and cautionary language, including how actual results may differ materially from those in the slide presentation. 15
Slide 16: Long-Term FCF Margin Improvement Opportunities and Range
Long-Term FCF Margin Improvement Opportunities and Range Long-Term Free Cash Flow Margin 16%+ 12% 400+ basis points improvement 2023 Tranzact Cash Transformation Long-Term Improved Profitability FCF Margin Conversion 1 Program Spend 2 FCF Margin Improvement in Abatement of cash Expansion of adjusted
Slide 17: Our Strategic Priorities: Grow, Simplify, Transform
Our Strategic Priorities: Grow, Simplify, Transform Focus on the execution on our strategy and the generation of outstanding value creation for all shareholders • Grow: Invest to grow at or above market in chosen areas • Simplify: Increase agility; do the basics well • Transform: Enhance client and
Slide 18: Recent Progress Against Strategic Priorities
Recent Progress Against Strategic Priorities ✓ Re-segmentation and corporate rebrand improving sales and retention outcomes Grow Transform ✓ Announced the launch of Verita, a new ✓ Realized $23M of incremental annualized MGU focused on industry verticals, to further advance specialization strategy i
Slide 19: We Have a Portfolio of Leading Businesses in Attractive Markets
We have: We Have a Portfolio of A distinctive mix of complementary businesses • Accomplished and aspiring talent Leading Businesses in • Collaborative client-first culture • Sophisticated data and analytics Attractive Markets • Powerful tools A strong balance sheet and significant financial flexibil
Slide 20: Segment Overview: Health, Wealth, & Career
Segment Overview: Health, Wealth, & Career1 Health, Wealth & Career: World-class portfolio of leading businesses 2022 Revenue providing advisory and consulting services within human capital, employee benefits and retirement verticals Health Health provides Wealth provides Career provides Benefits De
Slide 21: Segment Overview: Risk & Broking
Segment Overview: Risk & Broking1 Risk & Broking: Risk advisory and solutions business delivering 2022 Revenue innovative, integrated solutions tailored to client needs and underpinned by cutting edge data and analytics, technology and experienced risk ICT thinkers 11% Corporate Risk & Broking provi
Slide 22: Value Creation Framework
Value Creation Framework 1. Seek profitable growth through innovation in attractive markets 2. Target superior shareholder returns through buybacks and prudent investments 3. Defensive business model with historically lower volatility than other financial services subsectors 4. Accelerate operationa
Slide 23: Appendix: Reconciliation of Non-GAAP Measures
Appendix: Reconciliation of Non-GAAP Measures wtwco.com © 2023 WTW. All rights reserved. See “WTW Forward-Looking Statements“ above for information about forward-looking statements and cautionary language, including how actual results may differ materially from those in the slide presentation. 23
Slide 24: Constant Currency and Organic Revenue Change
Constant Currency and Organic Revenue Change As reported, USD millions except % Components of Revenue Change(i) Less: Less: Three Months Ended September 30, As Reported Currency Constant Currency Acquisitions/ Organic 2023 2022 % Change Impact Change Divestitures Change Health, Wealth & Career $ 1,2
Slide 25: Adjusted Op Income and Margin, Adj. EBITDA and Margin QTD
Adjusted Op Income and Margin, Adj. EBITDA and Margin QTD As reported, USD millions except % Three Months Ended September 30, 2023 2022 Income from operations and Operating margin $ 159 7.3% $ 154 7.9% Adjusted for certain items: Amortization 62 71 Restructuring costs 17 9 Transaction and transforma
Slide 26: Adjusted Op Income and Margin, Adj. EBITDA and Margin YTD
Adjusted Op Income and Margin, Adj. EBITDA and Margin YTD As reported, USD millions except % Nine Months Ended September 30, 2023 2022 Income from operations and Operating margin $ 586 8.9% $ 470 7.6% Adjusted for certain items: Impairment — 81 Amortization 203 239 Restructuring costs 30 71 Transact
Slide 27: Adjusted Net Income and Adjusted Diluted EPS, QTD
Adjusted Net Income and Adjusted Diluted EPS, QTD As reported, USD millions except % Three Months Ended September 30, 2023 2022 Net Income attributable to WTW $ 136 $ 190 Adjusted for certain items: Income from discontinued operations, net of tax — (8) Amortization 62 71 Restructuring costs 17 9 Tra
Slide 28: Adjusted Net Income and Adjusted Diluted EPS, YTD
Adjusted Net Income and Adjusted Diluted EPS, YTD As reported, USD millions except % Nine Months Ended September 30, 2023 2022 Net Income attributable to WTW $ 433 $ 421 Adjusted for certain items: Loss from discontinued operations, net of tax — 27 Impairment — 81 Amortization 203 239 Restructuring
Slide 29: Adjusted Income Before Taxes, Adjusted Income Tax Rate and Free Cash Flow
Adjusted Income Before Taxes, Adjusted Income Tax Rate and Free Cash Flow As reported, USD millions except % Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Income from continuing operations before income taxes $ 164 $ 185 Income from continuing operations before
Slide 30: About WTW
About WTW At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience,
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