ARLINGTON, Va.--(BUSINESS WIRE)--February 5, 2015--Towers Watson (NYSE, NASDAQ: TW), a leading global professional services company, today announced financial results for the second quarter of fiscal year 2015, which ended December 31, 2014.

Total revenues were $958 million for the quarter, an increase of 8% (11% constant currency) from $888 million for the second quarter of fiscal 2014. On an organic basis, which excludes the impact of changes in foreign currency exchange rates, acquisitions and divestitures, revenues increased 11% from the prior-year second quarter.

EBITDA for the second quarter of fiscal 2015 was $211 million, or 22.0% of revenues, versus Adjusted EBITDA of $172 million, or 19.4% of revenues, for the prior-year second quarter.

Income from continuing operations for the second quarter of fiscal 2015 was $110 million, an increase from $90 million from the prior-year second quarter. For the quarter, diluted earnings per share from continuing operations were $1.57, and adjusted diluted earnings per share from continuing operations were $1.73. The tax rate for the quarter for continuing operations was 33%.

“We are very pleased that the strong growth we experienced in the first quarter continued to gain momentum in the second quarter. Bulk lump sum projects and healthcare consulting drove revenue growth in the Benefits segment. Talent and Rewards delivered its strongest quarter in three years, and Exchange Solutions continued to exceed expectations, measured by both the financial results delivered, and with the quality of the annual enrollment process” said John Haley, Towers Watson’s chief executive officer. “We far surpassed participant satisfaction goals for the more than two million employees we enrolled in our health and welfare administration platforms, had the strongest retiree satisfaction ratings in our history, and the feedback from our clients and employees has been extremely positive regarding their enrollment experiences on the active exchange.”

For the quarter, the Benefits segment had revenues of $488 million, an increase of 7% (10% increase constant currency) from $457 million in the prior-year second quarter. Constant currency revenues increased in all lines of business and across all regions. Retirement had high-single digit constant currency revenue growth, due to an increase of bulk lump sum work and an increase in general project activity in the Americas region. Legislative change work helped drive growth in EMEA. Health and Group Benefits had low-double digit constant currency revenue growth driven by new plan management work. Technology and Administration Solutions had constant currency revenue growth in the mid-teens, due to bulk lump sum and increased pension administration projects across all regions. The Benefits segment had a Net Operating Income (“NOI”) margin of 36% in the second quarter of fiscal 2015.

For the quarter, the Risk and Financial Services segment had revenues of $154 million, a decrease of 4% (1% decrease constant currency) from $161 million in the prior-year second quarter. Risk Consulting and Software had constant currency revenue growth of low-single digits. Investment constant currency revenue decreased by mid-single digits, due to softness in the EMEA region. The Risk and Financial Services segment had an NOI margin of 27% in the second quarter of fiscal 2015.

For the quarter, the Talent and Rewards segment had revenues of $184 million, an increase of 8% (11% increase constant currency) from $170 million in the prior-year second quarter. Constant currency revenues increased in all lines of business and across all regions. Executive Compensation constant currency revenues increased by mid-single digits, due to increased M&A activity in the Americas and EMEA regions. Rewards, Talent and Communication had constant currency revenue growth in the mid-teens, with revenue growth in all regions, primarily driven by seasonal benefit enrollment work in the U.S. and M&A activity in EMEA. Data, Surveys and Technology had low-double digit constant currency revenue growth, due to the timing of survey delivery and strong demand for HR technology projects. The Talent and Rewards segment had an NOI margin of 37% in the second quarter of fiscal 2015. The first half of the fiscal year typically has stronger margins due to the seasonality of the business.

For the quarter, the Exchange Solutions segment had revenues of $94 million, an increase of 42% (42% increase constant currency) from $66 million in the prior-year second quarter. Retiree and Access Exchanges revenue increased by mid-50% as a result of a growing client portfolio. Health and Welfare Administration and OneExchange Active, a small and developing business, revenues posted strong growth due to new client work and special projects. The Exchange Solutions segment had an NOI margin of 13% in the second quarter of fiscal 2015. The second half of the fiscal year is seasonally stronger due to the timing of enrollments.

For fiscal 2015, the company continues to expect to report revenues of around $3.6 billion and is increasing expected adjusted diluted earnings per share to the range of $5.90 to $6.00. This guidance assumes an average exchange rate of 1.56 U.S. dollars to the British Pound and 1.20 U.S. dollars to the Euro for fiscal 2015.

For the third quarter of fiscal 2015, the company expects to report revenues in the range of $890 million to $900 million, reflecting constant currency revenue growth in the mid-single digits, and adjusted diluted earnings per share in the range of $1.46 to $1.51.

The company will host a live webcast and conference call to discuss the financial results for the second quarter of fiscal 2015. It will be held on Thursday, February 5, 2015, beginning at 9:00 a.m. Eastern Time, and can be accessed via the Internet at www.towerswatson.com. The replay of the call will be available shortly after the live call for a period of three months. A telephonic replay of the call will also be available through February 6, 2015 at 404-537-3406, conference ID 64578329.

Towers Watson is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. With 15,000 associates around the world, the company offers consulting, technology and solutions in the areas of benefits, talent management, rewards, and risk and capital management. Learn more at towerswatson.com.

In order to assist readers of our financial statements in understanding the core operating results that the Company’s management uses to evaluate the business and for financial planning, we present the following non-U.S. GAAP measures: (1) Adjusted EBITDA, (2) Adjusted Diluted Earnings Per Share from continuing operations, (3) Adjusted income from continuing operations and (4) Free Cash Flow. The Company believes these measures are relevant and provide useful information widely used by analysts, investors and other interested parties in our industry to provide a baseline for evaluating and comparing our operating results.

We consider Adjusted EBITDA and Adjusted Diluted Earnings Per Share from continuing operations to be important financial measures, which we use to internally evaluate and assess our core operations, and benchmark our operating results against our competitors. We use Adjusted EBITDA to evaluate and measure awards made under our performance-based compensation plans. Adjusted EBITDA and Adjusted Diluted Earnings Per Share are important in illustrating what our operating results would have been had we not incurred these acquisition-related expenses. Adjusted Income from continuing operations is used solely for the purpose of calculating Adjusted diluted earnings per share. Free Cash Flow is used to evaluate our core operating performance.

The Company’s non-U.S. GAAP measures and their accompanying definitions are presented as follows:

These non-U.S. GAAP measures are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies. Non-U.S. GAAP measures should be considered in addition to, and not as a substitute for, the information contained within our financial statements.

Reconciliation of Net income (attributable to common stockholders) to Adjusted EBITDA, Net income (attributable to common stockholders) to Adjusted income from continuing operations, Diluted earnings per share from continuing operations to Adjusted Diluted Earnings Per Share from continuing operations and Free Cash Flow are included in the accompanying tables and supplemental slides to today’s press release.

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these statements and other forward-looking statements in this document by words such as “may”, “will”, “would”, “expect”, “anticipate”, “believe”, “estimate”, “plan”, “intend”, “continue”, or similar words, expressions or the negative of such terms or other comparable terminology. Such statements are based upon the current beliefs and expectations of Towers Watson's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements.

The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: a decline in client demand (for example, resulting from the reduced use of defined benefit plans); the risk of a disclosure breach of company or client data; the risk of translation exposure impacting our results, arising from foreign currency exchange and interest rate fluctuations and volatility; the ability to successfully make suitable acquisitions and divestitures; the risk that the acquisitions of Extend Health and Liazon are not profitable or are not otherwise successfully integrated; our ability to protect client data and our information systems; the risk that potential changes in federal and state health care regulations, or future interpretation of existing regulations, may have a material adverse impact on our business; the risk that our Exchange Solutions or OneExchange businesses fail to maintain good relationships with insurance carriers, become dependent upon a limited number of insurance carriers or fail to develop new insurance carrier relationships; the risk that changes and developments in the health insurance system in the United States could harm our business; our ability to respond to rapid technological changes; the ability to recruit and retain qualified employees and to retain client relationships; and the risk that a significant or prolonged economic downturn could have a material adverse effect on Towers Watson's business, financial condition and results of operations. Additional risks and factors are identified under “Risk Factors” in Towers Watson’s most recent Annual Report on Form 10-K filed with the SEC.

You should not rely upon forward-looking statements as predictions of future events because these statements are based on assumptions that may not come true and are speculative by their nature. Towers Watson does not undertake an obligation to update any of the forward-looking information included in this document, whether as a result of new information, future events, changed expectations or otherwise.


TOWERS WATSON & CO.
Supplemental Segment Information
(In Thousands of U.S. Dollars)
(Unaudited)


	Segment Revenue

		Revenue for the Three
		Months Ended December 31,						% Change		Currency			Acquisitions			% Change
			2014		2013		GAAP			Impact			Divestitures			Organic

	Benefits*	$	488,453	$	456,840			7%			(3)%			0%		10%
	Risk & Financial Services		154,278		161,178			(4)%			(3)%			0%	%	(1)%
	Talent & Rewards		183,973		170,323			8%			(3)%			0%		11%
	Exchange Solutions*		93,924		66,233			42%			0%			3%		39%
	Reportable Segments	$	920,628	$	854,574

	*FY14 recast to reflect Exchange Solutions Segment expansion

		Revenue for the Six
		Months Ended December 31,						% Change		Currency			Acquisitions			% Change
			2014		2013		GAAP			Impact			Divestitures			Organic

	Benefits*	$	954,040	$	888,095			7%			(1)%			0%		8%
	Risk & Financial Services		302,304		302,961			0%			0%			0%		0%
	Talent & Rewards		337,267		323,892			4%			(2)%			0%		6%
	Exchange Solutions*		180,206		127,397			41%			0%			3%		38%
	Reportable Segments	$	1,773,817	$	1,642,345

	*FY14 recast to reflect Exchange Solutions Segment expansion

	Reconciliation of Reportable Segment Revenues to Consolidated Revenues

				Three Months Ended December 31,						Six Months Ended December 31,
					2014			2013			2014			2013

	Reportable Segments			$	920,628		$	854,574		$	1,773,817		$	1,642,345
	Reimbursable Expenses and Other				37,294			33,581			62,212			55,749
	Consolidated Revenues			$	957,922		$	888,155		$	1,836,029		$	1,698,094


	Segment Net Operating Income

				Three Months Ended December 31,						Six Months Ended December 31,
					2014			2013			2014			2013

	Benefits*			$	175,023		$	138,101		$	330,782		$	267,639
	Risk & Financial Services				41,744			34,442			77,305			56,929
	Talent & Rewards				67,568			53,096			104,411			97,160
	Exchange Solutions*				12,462			3,025			26,474			17,481
	Reportable Segments			$	296,797		$	228,664		$	538,972		$	439,209

	*FY14 recast to reflect Exchange Solutions Segment expansion

	Reconciliation of Reportable Segment Net Operating Income to Income from Operations

				Three Months Ended December 31,						Six Months Ended December 31,
					2014			2013			2014			2013

	Reportable Segments			$	296,797		$	228,664		$	538,972		$	439,209
	Differences in Allocation Methods				11,672			6,869			27,384			16,855
	Amortization of Intangible Assets				(17,279	)		(18,691	)		(34,816	)		(37,583	)
	Transaction and Integration Expenses				-			(808	)		-			(808	)
	Stock-Based Compensation				(5,738	)		(1,782	)		(11,290	)		(5,345	)
	Discretionary Compensation				(111,015	)		(74,085	)		(203,379	)		(150,207	)
	Payroll Tax on Discretionary Compensation				(6,327	)		(4,075	)		(11,846	)		(8,643	)
	Other, net				(1,100	)		(7,666	)		(12,017	)		(22,631	)
	Income from Operations			$	167,010		$	128,426		$	293,008		$	230,847


TOWERS WATSON & CO.
Reconciliation of Non-GAAP Measures
(In Thousands of U.S. Dollars, Except Per Share Data)
(Unaudited)

		Three Months Ended December 31,										Six Months Ended December 31,
			2014					2013					2014					2013

	Net Income (attributable to common stockholders)	$	110,176				$	86,188				$	191,734				$	174,402
	Less: (Loss) income from Discontinued Operations, net of tax		-					(403	)				-					2,041
	Income from Continuing Operations (attributable to common stockholders)		110,176					86,591					191,734					172,361
	Adjusted for certain acquisition related items:
	Amortization of intangible assets		11,507					12,731					22,932					28,841
	Transaction and integration expenses including severance		-					550					-					550
	Adjusted Income from continuing operations	$	121,683				$	99,872				$	214,666				$	201,752

	Weighted average shares of common stock, diluted (000)		70,262					71,213					70,429					71,130

	Diluted EPS from continuing operations	$	1.57				$	1.21				$	2.72				$	2.42
	Adjusted for certain acquisition related items:
	Amortization of intangible assets		0.16					0.18					0.33					0.40
	Transaction and integration expenses including severance		-					0.01					-					0.01
	Adjusted Diluted EPS from continuing operations	$	1.73				$	1.40				$	3.05				$	2.83


		Three Months Ended December 31,										Six Months Ended December 31,
			2014					2013					2014					2013

	Net Income (attributable to common stockholders)	$	110,176				$	86,188				$	191,734				$	174,402
	Less: (Loss) income from Discontinued Operations, net of tax		-					(403	)				-					2,041
	Income from Continuing Operations (attributable to common stockholders)		110,176					86,591					191,734					172,361
	Provision for Income Taxes		55,372					42,283					99,434					57,091
	Interest, net		1,292					1,467					2,557					3,374
	Depreciation and Amortization		44,107					43,296					88,976					86,681
	Transaction and Integration Expenses		-					808					-					808
	Other Non-Operating Income (a)		(34	)				(2,304	)				(865	)				(2,342	)
	Adjusted EBITDA and Adjusted EBITDA Margin	$	210,913		22.0	%	$	172,141		19.4	%	$	381,836		20.8	%	$	317,973		18.7	%

	(a) Other non-operating income excluding income from variable interest entity


TOWERS WATSON & CO.
Condensed Consolidated Statements of Operations
(In Thousands of U.S. Dollars, Except Per Share Data)
(Unaudited)

	Three Months Ended December 31,						Six Months Ended December 31,
		2014			2013			2014			2013

Revenue	$	957,922		$	888,155		$	1,836,029		$	1,698,094

Costs of providing services:
Salaries and employee benefits		556,319			526,731			1,089,847			1,027,150
Professional and subcontracted services		71,630			69,074			133,835			130,474
Occupancy		36,756			34,782			72,829			68,327
General and administrative expenses		82,100			85,038			157,534			153,807
Depreciation and amortization		44,107			43,296			88,976			86,681
Transaction and integration expenses		-			808			-			808
		790,912			759,729			1,543,021			1,467,247

Income from operations		167,010			128,426			293,008			230,847

Interest income		894			560			1,957			1,089
Interest expense		(2,186	)		(2,027	)		(4,514	)		(4,463	)
Other non-operating income		34			5,652			865			5,690

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		165,752			132,611			291,316			233,163

Provision for income taxes		55,372			42,283			99,434			57,091

INCOME FROM CONTINUING OPERATIONS		110,380			90,328			191,882			176,072

(Loss) / income from discontinued operations, net of tax of $-, $38,286, $- and $40,837, respectively		-			(403	)		-			2,041

NET INCOME BEFORE NON-CONTROLLING INTERESTS		110,380			89,925			191,882			178,113

Less: Income attributable to non-controlling interests		204			3,737			148			3,711

NET INCOME (attributable to common stockholders)	$	110,176		$	86,188		$	191,734		$	174,402


Basic earnings per share (attributable to common stockholders):
Income from continuing operations	$	1.58		$	1.22		$	2.74		$	2.43
Income from discontinued operations		-			-			-			0.03
Net income	$	1.58		$	1.22		$	2.74		$	2.46

Diluted earnings per share (attributable to common stockholders):
Income from continuing operations	$	1.57		$	1.21		$	2.72		$	2.42
Income from discontinued operations		-			-			-			0.03
Net income	$	1.57		$	1.21		$	2.72		$	2.45


Weighted average shares of common stock, basic (000)		69,875			70,809			70,029			70,805
Weighted average shares of common stock, diluted (000)		70,262			71,213			70,429			71,130


TOWERS WATSON & CO.
Condensed Consolidated Balance Sheets
(In Thousands of U.S. Dollars, Except Share Data)
(Unaudited)
	December 31,			June 30,
		2014			2014

Assets
Cash and cash equivalents	$	621,391		$	727,849
Fiduciary assets		19,793			12,010
Short-term investments		45,438			122,761
Receivables from clients:

Billed, net of allowances of $9,977 and $8,075		539,738			507,213
Unbilled, at estimated net realizable value		308,243			314,020
		847,981			821,233

Other current assets		126,833			124,645
Total current assets		1,661,436			1,808,498

Fixed assets, net		375,210			374,444
Deferred income taxes		63,439			79,103
Goodwill		2,192,431			2,313,058
Intangible assets, net		604,518			657,293
Other assets		439,852			395,390
Total Assets	$	5,336,886		$	5,627,786

Liabilities
Accounts payable, accrued liabilities and deferred income	$	378,502		$	404,760
Employee-related liabilities		386,450			518,532
Fiduciary liabilities		19,793			12,010
Term loan - current		25,000			25,000
Other current liabilities		39,996			74,297
Total current liabilities		849,741			1,034,599

Revolving credit facility		50,000			-
Term loan		187,500			200,000
Accrued retirement benefits and other employee-related liabilities		699,857			768,024
Professional liability claims reserve		235,554			225,959
Other noncurrent liabilities		271,008			288,255
Total Liabilities		2,293,660			2,516,837

Commitments and contingencies

Stockholders' Equity
Class A Common Stock -- $0.01 par value: 300,000,000 shares authorized;
74,552,661 issued, and 69,699,937 and 70,338,891 outstanding		746			746
Additional paid-in capital		1,865,888			1,849,119
Treasury stock, at cost -- 4,852,724 and 4,213,770 shares		(362,989	)		(286,182	)
Retained earnings		1,893,545			1,722,927
Accumulated other comprehensive loss		(367,606	)		(189,702	)
Total Stockholders' Equity		3,029,584			3,096,908
Non-controlling interest		13,642			14,041
Total Equity		3,043,226			3,110,949

Total Liabilities and Total Equity	$	5,336,886		$	5,627,786


TOWERS WATSON & CO.
Condensed Consolidated Statements of Cash Flows
(In Thousands of U.S. Dollars)
(Unaudited)
		Six Months Ended December 31,
			2014			2013

Cash flows from / (used in) operating activities:
	Net income before non-controlling interests	$	191,882		$	178,113
	Adjustments to reconcile net income to net cash from / (used in) operating activities:
	Provision for doubtful receivables from clients		11,157			566
	Depreciation		54,160			49,097
	Amortization of intangible assets		34,816			38,022
	Gain on sale of discontinued operations, pretax		-			(18,480	)
	Provision for deferred income taxes		24,569			51,276
	Stock-based compensation		18,414			11,509
	Other, net		535			(1,619	)
	Changes in operating assets and liabilities
	Receivables from clients		(76,970	)		47,340
	Fiduciary assets		(7,783	)		110,743
	Other current assets		(15,117	)		(858	)
	Other noncurrent assets		717			(5,139	)
	Accounts payable, accrued liabilities and deferred income		(31,885	)		(44,160	)
	Employee-related liabilities		(104,651	)		(224,683	)
	Fiduciary liabilities		7,783			(110,743	)
	Accrued retirement benefits and other employee-related liabilities		(78,919	)		(104,386	)
	Professional liability claims reserves		15,427			2,887
	Other current liabilities		14,682			(762	)
	Other noncurrent liabilities		(18,528	)		(256	)
	Income tax related accounts		(38,389	)		1,599
	Cash flows from / (used) in operating activities		1,900			(19,934	)

Cash flows from / (used in) investing activities:
	Cash paid for business acquisitions		(1,255	)		(210,814	)
	Cash transferred with discontinued operations		-			(25,066	)
	Proceeds from discontinued operations		-			256,953
	Cash acquired from business acquisitions		-			3,949
	Fixed assets and software for internal use		(33,113	)		(38,566	)
	Capitalized software costs		(33,507	)		(23,327	)
	Purchases of investments of consolidated variable interest entity		-			(50,510	)
	Purchases of held-to-maturity investments		(155,927	)		-
	Redemptions of held-to-maturity investments		214,510			-
	Purchases of available-for-sale securities		(1,677	)		(31,779	)
	Sales and redemptions of available-for-sale securities		11,734			56,580
	Cash flows from / (used in) investing activities		765			(62,580	)

Cash flows (used in) / from financing activities:
	Borrowings under credit facility		275,000			144,100
	Repayments under credit facility		(225,000	)		(109,100	)
	Repayments of notes payable		(12,500	)		(12,500	)
	Cash received from consolidated variable interest entity		-			50,510
	Contingent retention liability		-			21,746
	Cash paid on retention liability		(10,338	)		(1,939	)
	Dividends paid		(20,204	)		(613	)
	Repurchases of common stock		(81,410	)		(40,533	)
	Payroll tax payments on vested shares		(10,833	)		(7,457	)
	Excess tax benefits		4,618			9,800
	Cash flows (used in) / from financing activities		(80,667	)		54,014

Effect of exchange rates on cash			(28,456	)		7,638

Decrease in cash and cash equivalents			(106,458	)		(20,862	)

Cash and cash equivalents at beginning of period			727,849			532,805

Cash and cash equivalents at end of period		$	621,391		$	511,943

CONTACT:
Towers Watson
Investor Contact:
Aida Sukys, +1 703-258-8033
aida.sukys@towerswatson.com