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

Total revenues were $921 million for the quarter, an increase of 2% (7% constant currency and organic) from $905 million for the third quarter of fiscal 2014.

EBITDA for the third quarter of fiscal 2015 was $205 million, or 22% of revenues, versus Adjusted EBITDA of $183 million, or 20% of revenues, for the prior-year third quarter.

Income from continuing operations for the third quarter of fiscal 2015 was $104 million, an increase from $102 million from the prior-year third quarter. For the quarter, diluted earnings per share from continuing operations were $1.49, and adjusted diluted earnings per share from continuing operations were $1.63. The tax rate for the quarter for continuing operations was 36%, as compared to 28% for the prior-year third quarter. The prior-year third quarter tax rate benefited from one-time reserve adjustments.

“We are very pleased with our third quarter results. Healthcare and pension consulting as well as pension administration drove revenue growth in the Benefits segment. Talent and Rewards delivered its strongest quarter in almost four years due to the high level of global M&A activity, and Exchange Solutions continued to exceed expectations, as demand for retiree exchange and healthcare administration remained strong,” said John Haley, Towers Watson’s chief executive officer. “The fiscal year-to-date results are a testament to the work ethic of our associates, and their commitment to creating value for our clients. These factors are critical as we continue to focus on building long-term sustainable earnings growth.”

For the quarter, the Benefits segment had revenues of $496 million, a decrease of 1% (5% increase constant currency) from $501 million in the prior-year third quarter. Retirement had mid-single digit constant currency revenue growth, led by EMEA and Asia Pacific. The timing of commissions and valuation work drove growth in EMEA and an increase in consulting work drove the growth in the Asia Pacific region. Health and Group Benefits had low-double digit constant currency revenue growth due to an increase in new plan management clients and special projects. Technology and Administration Solutions had constant currency revenue growth in the mid-single digits, due to an increase in administration and special projects in EMEA. The Benefits segment had a Net Operating Income (“NOI”) margin of 39% in the third quarter of fiscal 2015.

For the quarter, the Exchange Solutions segment had revenues of $97 million, an increase of 31% (31% increase constant currency) from $74 million in the prior-year third quarter. Retiree and Access Exchanges revenue increased by over 30% due to a strong enrollment season and a growing membership base. OneExchange Active revenues increased by over 70% as a result of the annual enrollment season. Health and Welfare Administration revenue increased by more than 20% due to an expanded client base and a strong demand for special projects. The Exchange Solutions segment had an NOI margin of 21% in the third quarter of fiscal 2015. The second half of the fiscal year is seasonally stronger due to the timing of enrollments.

For the quarter, the Risk and Financial Services segment had revenues of $156 million, a decrease of 10% (3% decrease constant currency) from $174 million in the prior-year third quarter. Risk Consulting and Software had a constant currency revenue decline of mid-single digits. Increased software sales were off-set by lower consulting demand. Investment constant currency revenue increased by low-single digits, due to increased performance fees and project work. The Risk and Financial Services segment had an NOI margin of 32% in the third quarter of fiscal 2015.

For the quarter, the Talent and Rewards segment had revenues of $140 million, an increase of 10% (15% increase constant currency) from $128 million in the prior-year third quarter. Executive Compensation constant currency revenues increased by low-double digits, due to increased M&A activity in the Americas and Asia Pacific regions. Rewards, Talent and Communication had constant currency revenue growth over 20%, primarily driven by M&A activity in the Americas and EMEA regions. Data, Surveys and Technology had high-single 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 20% in the third quarter of fiscal 2015. The second half of the fiscal year typically has lower margins due to the seasonality of the business.

For fiscal 2015, the company continues to expect to report revenues of approximately $3.6 billion and is increasing expected adjusted diluted earnings per share to the range of $6.03 to $6.10. This guidance assumes an average exchange rate of 1.57 U.S. dollars to the British Pound and 1.20 U.S. dollars to the Euro for fiscal 2015.

The company will host a live webcast and conference call to discuss the financial results for the third quarter of fiscal 2015. It will be held on Tuesday, May 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 May 6, 2015 at 404-537-3406, conference ID 23646444.

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) Constant Currency Change, (2) Organic Change, (3) Adjusted EBITDA, (4) Adjusted Diluted Earnings Per Share from continuing operations, (5) Adjusted income from continuing operations and (6) 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 evaluate our revenues on an as reported, constant currency, and an organic basis. We believe providing constant currency and organic information provides valuable supplemental information regarding our results, consistent with how we evaluate our performance internally.

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 the As Reported Change to Constant Currency Change, the As Reported Change to Organic Change, 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 Cash Flows from Operating Activities to 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 Saville Consulting and Liazon, and other acquisitions, 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							Components of Revenue Change
	Months Ended March 31,				As Reported			Currency			Constant Currency			Acquisitions		Organic
	2015		2014		Change			Impact			Change			Divestitures		Change

Benefits*	$	495,689	$	500,795		(1	)%		(6	)%		5	%	0	%	5	%
Exchange Solutions*		96,963		74,170		31	%		0	%		31	%	0	%	31	%
Risk & Financial Services		156,212		174,382		(10	)%		(7	)%		(3	)%	0	%	(3	)%
Talent & Rewards		140,103		127,572		10	%		(5	)%		15	%	0	%	15	%
Reportable Segments	$	888,967	$	876,919

*FY14 recast to reflect Exchange Solutions Segment expansion

	Revenue for the Nine							Components of Revenue Change
	Months Ended March 31,				As Reported			Currency			Constant Currency			Acquisitions		Organic
	2015		2014		Change			Impact			Change			Divestitures		Change

Benefits*	$	1,449,729	$	1,388,890		4	%		(3	)%		7	%	0	%	7	%
Exchange Solutions*		277,169		201,567		38	%		0	%		38	%	3	%	35	%
Risk & Financial Services		458,516		477,343		(4	)%		(3	)%		(1	)%	0	%	(1	)%
Talent & Rewards		477,370		451,464		6	%		(2	)%		8	%	0	%	8	%
Reportable Segments	$	2,662,784	$	2,519,264

*FY14 recast to reflect Exchange Solutions Segment expansion

Reconciliation of Reportable Segment Revenues to Consolidated Revenues

			Three Months Ended March 31,					Nine Months Ended March 31,
			2015		2014			2015			2014

Reportable Segments			$	888,967	$	876,919		$	2,662,784		$	2,519,264
Reimbursable Expenses and Other				31,747		27,914			93,959			83,663
Consolidated Revenues			$	920,714	$	904,833		$	2,756,743		$	2,602,927


Reconciliation of As Reported Revenue change to Constant Currency change and Organic change

								Components of Revenue Change
	Consolidated Revenues				As Reported			Currency			Constant Currency			Acquisitions		Organic
	2015		2014		Change			Impact			Change			Divestitures		Change

Three Months ended March 31,	$	920,714	$	904,833		2	%		(5	)%		7	%	0	%	7	%
Nine Months ended March 31,	$	2,756,743	$	2,602,927		6	%		(2	)%		8	%	0	%	8	%


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

Segment Net Operating Income

	Three Months Ended March 31,						Nine Months Ended March 31,
	2015			2014			2015			2014

Benefits*	$	190,873		$	172,445		$	521,655		$	440,084
Exchange Solutions*		20,803			17,037			47,277			34,518
Risk & Financial Services		49,670			53,047			126,975			109,976
Talent & Rewards		27,946			11,558			132,357			108,718
Reportable Segments	$	289,292		$	254,087		$	828,264		$	693,296

*FY14 recast to reflect Exchange Solutions Segment expansion

Reconciliation of Reportable Segment Net Operating Income to Income from Operations

	Three Months Ended March 31,						Nine Months Ended March 31,
	2015			2014			2015			2014

Reportable Segments	$	289,292		$	254,087		$	828,264		$	693,296
Differences in Allocation Methods		(1,180	)		(6,885	)		26,204			9,970
Amortization of Intangible Assets		(15,033	)		(19,380	)		(49,849	)		(56,963	)
Transaction and Integration Expenses		-			(241	)		-			(1,049	)
Stock-Based Compensation		(4,729	)		(2,362	)		(16,019	)		(7,707	)
Discretionary Compensation		(97,533	)		(75,712	)		(300,912	)		(225,919	)
Payroll Tax on Discretionary Compensation		(5,861	)		(5,335	)		(17,707	)		(13,978	)
Other, net		(479	)		(5,749	)		(12,496	)		(28,380	)
Income from Operations	$	164,477		$	138,423		$	457,485		$	369,270


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

	Three Months Ended March 31,										Nine Months Ended March 31,
	2015					2014					2015					2014

Net Income (attributable to common stockholders)	$	104,142				$	102,506				$	295,876				$	276,908
Less: Income from Discontinued Operations, net of tax		-					3,939					-					5,980
Income from Continuing Operations (attributable to common stockholders)		104,142					98,567					295,876					270,928
Adjusted for certain acquisition related items:
Amortization of intangible assets		9,602					13,993					32,477					42,834
Transaction and integration expenses including severance		-					174					-					724
Adjusted Income from continuing operations	$	113,744				$	112,734				$	328,353				$	314,486

Weighted average shares of common stock, diluted (000)		69,771					70,884					70,163					71,047

Diluted EPS from continuing operations	$	1.49				$	1.39				$	4.22				$	3.81
Adjusted for certain acquisition related items:
Amortization of intangible assets		0.14					0.20					0.46					0.60
Transaction and integration expenses including severance		-					-					-					0.01
Adjusted Diluted EPS from continuing operations	$	1.63				$	1.59				$	4.68				$	4.42


	Three Months Ended March 31,										Nine Months Ended March 31,
	2015					2014					2015					2014

Net Income (attributable to common stockholders)	$	104,142				$	102,506				$	295,876				$	276,908
Less: Income from Discontinued Operations, net of tax		-					3,939					-					5,980
Income from Continuing Operations (attributable to common stockholders)		104,142					98,567					295,876					270,928
Provision for Income Taxes		59,025					39,231					158,459					96,322
Interest, net		1,541					1,332					4,098					4,706
Depreciation and Amortization		41,185					44,250					130,161					130,931
Transaction and Integration Expenses		-					241					-					1,049
Other Non-Operating Income (a)		(449	)				(1,104	)				(1,314	)				(3,446	)
Adjusted EBITDA and Adjusted EBITDA Margin	$	205,444		22.3	%	$	182,517		20.2	%	$	587,280		21.3	%	$	500,490		19.2	%


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

	Three Months Ended March 31,						Nine Months Ended March 31,
	2015			2014			2015			2014

Revenue	$	920,714		$	904,833		$	2,756,743		$	2,602,927

Costs of providing services:
Salaries and employee benefits		544,176			547,385			1,634,023			1,574,535
Professional and subcontracted services		65,838			57,729			199,673			188,203
Occupancy		32,416			33,961			105,245			102,288
General and administrative expenses		72,622			82,844			230,156			236,651
Depreciation and amortization		41,185			44,250			130,161			130,931
Transaction and integration expenses		-			241			-			1,049
		756,237			766,410			2,299,258			2,233,657

Income from operations		164,477			138,423			457,485			369,270

Loss from affiliates		(17	)		-			(17	)		-
Interest income		938			758			2,895			1,847
Interest expense		(2,479	)		(2,090	)		(6,993	)		(6,553	)
Other non-operating income		466			4,053			1,331			9,743

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		163,385			141,144			454,701			374,307

Provision for income taxes		59,025			39,231			158,459			96,322

INCOME FROM CONTINUING OPERATIONS		104,360			101,913			296,242			277,985

Income from discontinued operations, net of tax of $-, $175, $- and $41,012, respectively		-			3,939			-			5,980

NET INCOME BEFORE NON-CONTROLLING INTERESTS		104,360			105,852			296,242			283,965

Less: Income attributable to non-controlling interests		218			3,346			366			7,057

NET INCOME (attributable to common stockholders)	$	104,142		$	102,506		$	295,876		$	276,908


Basic earnings per share (attributable to common stockholders):
Income from continuing operations	$	1.50		$	1.40		$	4.23		$	3.83
Income from discontinued operations		-			0.06			-			0.09
Net income	$	1.50		$	1.46		$	4.23		$	3.92

Diluted earnings per share (attributable to common stockholders):
Income from continuing operations	$	1.49		$	1.39		$	4.22		$	3.81
Income from discontinued operations		-			0.06			-			0.09
Net income	$	1.49		$	1.45		$	4.22		$	3.90


Weighted average shares of common stock, basic (000)		69,602			70,447			69,909			70,685
Weighted average shares of common stock, diluted (000)		69,771			70,884			70,163			71,047

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

	March 31,			June 30,
	2015			2014

Assets
Cash and cash equivalents	$	690,408		$	727,849
Fiduciary assets		24,026			12,010
Short-term investments		69,177			122,761
Receivables from clients:
Billed, net of allowances of $10,918 and $8,075		484,791			507,213
Unbilled, at estimated net realizable value		340,924			314,020
		825,715			821,233

Other current assets		143,181			124,645
Total current assets		1,752,507			1,808,498
Fixed assets, net		370,175			374,444
Deferred income taxes		56,763			79,103
Goodwill		2,112,107			2,313,058
Intangible assets, net		579,575			657,293
Other assets		439,531			395,390
Total Assets	$	5,310,658		$	5,627,786

Liabilities
Accounts payable, accrued liabilities and deferred income	$	390,846		$	404,760
Employee-related liabilities		479,117			518,532
Fiduciary liabilities		24,026			12,010
Term loan - current		25,000			25,000
Other current liabilities		55,143			74,297
Total current liabilities		974,132			1,034,599

Revolving credit facility		-			-
Term loan		181,250			200,000
Accrued retirement benefits and other employee-related liabilities		671,413			768,024
Professional liability claims reserve		238,549			225,959
Other noncurrent liabilities		257,270			288,255
Total Liabilities		2,322,614			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 69,451,434 and 70,338,891 outstanding		746			746
Additional paid-in capital		1,869,270			1,849,119
Treasury stock, at cost -- 5,101,227 and 4,213,770 shares		(402,323	)		(286,182	)
Retained earnings		1,987,231			1,722,927
Accumulated other comprehensive loss		(480,503	)		(189,702	)
Total Stockholders' Equity		2,974,421			3,096,908
Non-controlling interest		13,623			14,041
Total Equity		2,988,044			3,110,949

Total Liabilities and Total Equity	$	5,310,658		$	5,627,786


TOWERS WATSON & CO.
Condensed Consolidated Statements of Cash Flows
(In Thousands of U.S. Dollars)
(Unaudited)

	Nine Months Ended March 31,
	2015			2014

Cash flows from operating activities:
Net income before non-controlling interests	$	296,242		$	283,965
Adjustments to reconcile net income to net cash from operating activities:
Provision for doubtful receivables from clients		19,086			4,241
Depreciation		80,312			73,967
Amortization of intangible assets		49,849			57,402
Gain on sale of discontinued operations, pretax		-			(23,631	)
Provision for deferred income taxes		23,727			64,052
Stock-based compensation		26,323			16,045
Other, net		1,696			(3,743	)
Changes in operating assets and liabilities
Receivables from clients		(91,506	)		16,846
Fiduciary assets		(12,016	)		113,017
Other current assets		(10,850	)		1,016
Other noncurrent assets		3,269			(6,432	)
Accounts payable, accrued liabilities and deferred income		(10,501	)		(34,948	)
Employee-related liabilities		12,003			(128,510	)
Fiduciary liabilities		12,016			(113,017	)
Accrued retirement benefits and other employee-related liabilities		(92,254	)		(113,690	)
Professional liability claims reserves		21,801			9,418
Other current liabilities		13,709			(607	)
Other noncurrent liabilities		(29,385	)		(14,141	)
Income tax related accounts		(43,032	)		21,501
Cash flows from operating activities		270,489			222,751

Cash flows 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		(48,540	)		(50,825	)
Capitalized software costs		(46,478	)		(36,596	)
Purchases of investments of consolidated variable interest entity		-			(109,510	)
Purchases of held-to-maturity investments		(202,757	)		(14,994	)
Redemptions of held-to-maturity investments		232,178			-
Purchases of available-for-sale securities		(8,449	)		(44,891	)
Sales and redemptions of available-for-sale securities		29,164			74,246
Cash flows used in investing activities		(46,137	)		(157,548	)

Cash flows (used in) / from financing activities:
Borrowings under credit facility		275,000			220,600
Repayments under credit facility		(275,000	)		(220,600	)
Repayments of notes payable		(18,750	)		(18,750	)
Cash received from consolidated variable interest entity		-			109,510
Contingent retention liability		-			21,746
Cash paid on retention liability		(10,338	)		(1,939	)
Dividends paid		(30,659	)		(11,165	)
Repurchases of common stock		(133,849	)		(74,506	)
Payroll tax payments on vested shares		(10,764	)		(7,457	)
Excess tax benefits		4,603			9,800
Cash flows (used in) / from financing activities		(199,757	)		27,239

Effect of exchange rates on cash		(62,036	)		11,713

(Decrease) / increase in cash and cash equivalents		(37,441	)		104,155

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

Cash and cash equivalents at end of period	$	690,408		$	636,960