Willis Towers Watson(US:WTW)2023-07-27 18:01Revenue Performance - Revenue for Q2 2023 was $2.2 billion, a 6% increase from $2.0 billion in Q2 2022, with organic revenue growth of 7% after adjusting for currency impacts [135]. - For the first half of 2023, revenue reached $4.4 billion, up 5% from $4.2 billion in the same period of 2022, with organic growth of 8% [135]. - Revenue for the three months ended June 30, 2023, was $2.159 billion, representing a 6% increase from $2.031 billion in the same period of 2022 [143]. - HWC segment revenue for the three months ended June 30, 2023, was $1.215 billion, a 5% increase from $1.159 billion in the same period of 2022 [148]. - R&B segment revenue for the three months ended June 30, 2023, was $900 million, up 6% from $852 million in the same period of 2022 [154]. - HWC segment revenue for the six months ended June 30, 2023, was $2.502 billion, a 4% increase from $2.403 billion in the same period of 2022 [151]. - R&B segment revenue for the six months ended June 30, 2023, was $1.804 billion, a 3% increase from $1.743 billion in the same period of 2022 [157]. - Revenue for the six months ended June 30, 2023, was $4,403 million, reflecting a 5% increase compared to the same period in 2022, with organic revenue growth of 8% [219]. Cost and Expenses - Total costs of providing services for Q2 2023 were $2.0 billion, compared to $1.9 billion in Q2 2022, reflecting a 6% increase [134]. - Total costs of providing services for the three months ended June 30, 2023, were $2.0 billion, an increase of 6% from $1.9 billion in the same period of 2022 [158]. - Total costs of providing services for the six months ended June 30, 2023, were $4.0 billion, an increase of 3% from $3.9 billion in the same period of 2022 [158]. - Salaries and benefits for the three months ended June 30, 2023, were $1.3 billion, an increase of 7% from the same period in 2022 [159]. - The company incurred restructuring costs of $10 million in Q2 2023, down from $56 million in Q2 2022, contributing to the adjusted operating income [222]. Income and Profitability - Income from continuing operations for Q2 2023 was $96 million, a decrease from $160 million in Q2 2022 [134]. - Income from operations for the three months ended June 30, 2023, was $142 million, a $5 million increase from $137 million in the same period of 2022 [168]. - Income from operations for the six months ended June 30, 2023, was $427 million, an increase of $111 million from $316 million in the same period of 2022 [169]. - Net income attributable to WTW for Q2 2023 was $94 million, a decrease of 14% from $109 million in Q2 2022, while for the first half of 2023, it increased to $297 million, up 29% from $231 million in the same period last year [176][177]. - The company reported net income of $485 million for the six months ended June 30, 2023, attributable entirely to WTW [211]. Cash Flow and Financing - Cash flows from operating activities for the first half of 2023 were $430 million, compared to $258 million in the same period of 2022, reflecting improved working capital movements [188]. - Cash flows used in investing activities for the first half of 2023 were $1.0 billion, compared to cash flows from investing activities of $19 million in the same period of 2022, primarily due to a transfer of $916 million related to the Willis Re business [190]. - Cash flows used in financing activities for the first half of 2023 were $113 million, including share repurchases of $454 million and dividend payments of $177 million [191]. - Total debt as of June 30, 2023, was $5.464 billion, an increase from $4.721 billion at December 31, 2022, with a capitalization ratio of 35.8% [193]. - Cash and cash equivalents at June 30, 2023, totaled $1.6 billion, up from $1.3 billion at December 31, 2022, primarily due to net proceeds of $742 million from a senior notes offering [185]. Share Repurchase and Dividends - The company has $889 million remaining on its share repurchase authority as of June 30, 2023, with a maximum potential repurchase of approximately 3.77 million shares based on the closing price [200]. - The company repurchased 1,537,312 shares at an average price of $227.67, totaling an aggregate repurchase cost of $350 million for the three months ended June 30, 2023 [201]. - Total cash dividends paid during the six months ended June 30, 2023, amounted to $177 million, with a quarterly cash dividend of $0.84 per share approved in May 2023 [203]. Adjusted Metrics - Adjusted operating income is defined as income from operations adjusted for significant non-recurring items, which is crucial for evaluating core operations [221]. - Adjusted operating income for Q2 2023 was $315 million, slightly up from $314 million in Q2 2022, while for the six months ended June 30, 2023, it increased to $733 million from $685 million in the same period last year [223]. - Adjusted EBITDA for Q2 2023 was $411 million, down from $450 million in Q2 2022, and for the six months ended June 30, 2023, it was $914 million compared to $968 million in the prior year [226]. - Adjusted diluted earnings per share for Q2 2023 decreased to $2.05 from $2.32 in Q2 2022, and for the six months ended June 30, 2023, it was $4.89 compared to $4.99 in the same period last year [230]. - The adjusted operating income margin for Q2 2023 was 14.6%, slightly down from 15.5% in Q2 2022 [222]. Interest and Market Risks - Interest expense for Q2 2023 was $57 million, up 12% from $51 million in Q2 2022, and for the first half of 2023, it was $111 million, an 11% increase from $100 million in the same period last year [170]. - Interest income for the three and six months ended June 30, 2023, was $35 million and $67 million, respectively, compared to $7 million and $11 million for the same periods in 2022 [242]. - The company held $2.0 billion of fiduciary funds invested in interest-bearing accounts as of June 30, 2023 [242]. - If short-term interest rates change by 25 basis points, interest income from fiduciary funds would increase or decrease by approximately $5 million annually [242]. - The company has maintained its exposure to market risks without material changes since the last annual report [240]. Strategic Initiatives - The Transformation program is expected to generate annual cost savings exceeding $380 million by the end of 2024, with cumulative costs projected at approximately $630 million [130]. - Restructuring charges under the Transformation program totaled $10 million for Q2 2023, down from $56 million in Q2 2022 [131]. - The company identified an additional $53 million in annualized run-rate savings during Q2 2023 due to newly realized opportunities [131]. - The company is focused on developing technology, data, and analytic solutions to enhance operations and meet client preferences [124].