Q4 2024 Earnings Summary
- WTW expects continued operating margin expansion, including an average of 100 basis points annual growth over the next three years in the Risk & Broking segment, and incremental margin improvements in the Health, Wealth & Career segment, which already has high margins, indicating strong focus on profitability.
- WTW remains committed to shareholder returns as a central component of their capital allocation strategy, planning to be aggressive and opportunistic with share repurchases and seeing their stock as undervalued, signaling management's confidence in the company's future performance and potential for shareholder value.
- WTW's Specialization strategy has been a key driver of growth, with Specialty businesses outpacing overall average growth, and the company is expanding this strategy into new geographies, particularly North America, with key leadership hires to drive and accelerate growth, indicating strong future growth prospects.
- Career segment revenue grew only 1% in the fourth quarter, below expectations due to project delays, which may impact overall growth projections.
- Initial investments in the reinsurance joint venture are expected to result in a $0.25 to $0.35 headwind to adjusted EPS in 2025, potentially negatively affecting earnings. ,
- The planned $1.5 billion share repurchase in 2025 might be lower than some expectations due to increased capital allocation toward M&A and other investment opportunities, possibly reducing shareholder returns.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +4.1% (from $2,914M to $3,035M) | Revenue increased modestly due to overall operational improvements and disciplined execution relative to Q4 2023, reflecting the company’s ongoing transformation efforts. |
North America Revenue | +22.8% (from $1,705M to $2,096M) | Strong growth in North America was driven by robust new business activity, enhanced client retention, and increased brokerage income, building on prior period performance driven by new local appointments and diversified offerings. |
Europe Revenue | +57.6% (from $825M to $1,301M) | Europe revenue surged as a result of double-digit growth in both the Health, Wealth & Career and Risk & Broking segments, driven by expansion in global benefits management, higher fees, and improved consulting services, thus building on the strong organic momentum evident in the previous period. |
International Revenue | –84.4% (from $294M to $46M) | The dramatic decline in International revenue likely reflects a strategic exit or realignment from international markets, a considerable shift from the prior period’s diversified activity. |
Health, Wealth & Career Revenue | +1.3% (from $1,798M to $1,821M) | Modest growth in HWC indicates that while there were gains from organic growth in areas like client retention and consulting, these were nearly offset by subdued performance in sub-segments such as Benefits Delivery & Outsourcing compared to Q4 2023. |
Risk & Broking Revenue | –4.4% (from $1,076M to $1,029M) | A slight decline in R&B revenue may be attributed to market shifts and strategic refocusing, despite continued efforts in client retention and new business—reflecting a contrasting trend to the North American and Europe segments. |
Operating Income | +15.6% (from $779M to $901M) | Operating income improved significantly as a result of enhanced operating leverage, cost discipline through transformation program savings, and overall revenue growth from core businesses, building on the efficiencies implemented in the previous period. |
Net Income | +100% (from $622M to $1,248M) | Net income doubled thanks to a turnaround in profitability driven by improved operational performance and margin expansion; the strong recovery contrasts sharply with prior period results and indicates effective cost control and revenue enhancement measures. |
Basic EPS | +107% (from $5.93 to $12.32) | Earnings per share more than doubled due to the remarkable recovery in net income combined with streamlined expense management, reflecting strong underlying business growth compared to Q4 2023. |
Net Change in Cash | From –$5M to +$1,303M | A substantial turnaround in cash flow was driven by an increase in net cash from operating activities, a significant reduction in investing outflows, and improved financing results, marking an impressive shift from the near-zero change in Q4 2023. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Pricing environment | FY 2025 | no prior guidance | Market expected to remain stable with increased competition; rate reductions decelerating in cyber/professional lines. | no prior guidance |
Revenue growth | FY 2025 | no prior guidance | Health expected to deliver high single-digit growth in 2025. | no prior guidance |
Margin expansion | FY 2025 | no prior guidance | Overall margin expansion driven by Transformation program; R&B 100 bps expansion over next three years. | no prior guidance |
Free cash flow | FY 2025 | no prior guidance | Free cash flow margin expected to expand; $90M outflow for Transformation settlement; up to $90M tax headwind. | no prior guidance |
Capital allocation | FY 2025 | no prior guidance | $1.5B for share repurchases in 2025, reinsurance JV investment is $0.25–$0.35 EPS headwind. | no prior guidance |
Non-GAAP metrics | FY 2025 | no prior guidance | From Q1 2025, pension income excluded from adjusted EPS/EBITDA; free cash flow includes capitalized software costs. | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Share Repurchases | FY 2024 | $900 million | $1,209 million (sum of Q1: 101, Q2: 2, Q3: 205, Q4: 901) | Beat |
Research analysts covering WILLIS TOWERS WATSON.