Willis Towers Q4 Earnings & Revenues Beat Estimates on Lower Expenses

Core Insights - Willis Towers Watson (WTW) reported fourth-quarter 2025 adjusted earnings of $8.12 per share, exceeding the Zacks Consensus Estimate by 2.5%, with a year-over-year increase of 2% [1] - The quarterly results were supported by expanded operating margins in the Health, Wealth & Career and Risk & Broking segments, along with reduced expenses [1] Operational Update - WTW's adjusted consolidated revenues were $2.9 billion, reflecting a 3% decline year over year on a reported basis, but a 6% increase on an organic basis; the top line also beat the Zacks Consensus Estimate by 2.5% [2] - Total service costs decreased by 10% year over year to $1.9 billion, attributed to lower operating expenses, amortization, and transaction costs [2] Financial Performance - Adjusted operating income was $1 billion, down 1% year over year, with a margin expansion of 80 basis points to 36.9% [3] - Adjusted EBITDA was $1.12 billion, a 3% decrease year over year, with an adjusted EBITDA margin of 38.2%, which expanded by 30 basis points [3] Segment Performance - Health, Wealth & Career segment revenues totaled $1.6 billion, down 11% year over year, but beat estimates by 0.6%; organic growth was driven by strong client retention and healthcare inflation [4] - Wealth segment saw organic revenue growth from robust Retirement work and new product offerings, while Career segment growth was fueled by demand for advisory services and compensation benchmarking [5] - Risk & Broking segment revenues rose 10% year over year to $1.2 billion, exceeding estimates by 4.9%, driven by new business activity and strong client retention [6][8] Financial Update - As of December 31, 2025, cash and cash equivalents were $3.1 billion, a 65.7% increase from the end of 2024; long-term debt rose 8.4% to $5.7 billion [10] - Free cash flow for 2025 increased by 22% year over year to $1.55 billion, primarily due to operating margin expansion [11] Future Outlook - WTW anticipates a 10 cents dilution to adjusted EPS in 2026 from the Newfront acquisition, with projected post-close revenues of $250 million and an adjusted EBITDA margin of 26% [12] - The company expects continued annual margin expansion at the enterprise level, with a foreign currency tailwind on adjusted diluted EPS of 30 cents in 2026 [13] - Share repurchases of $1.0 billion or more are planned, subject to market conditions [14] Full-Year Highlights - For the full year, adjusted earnings were $17.08 per share, beating estimates by 1.2%, with total revenues declining 2% year over year to approximately $9.7 billion, also exceeding estimates by 0.6% [15]