Willis Towers Watson has announced financial results for the third quarter ended September 30, 2020.
“I am very pleased with the Company’s financial results for the third quarter and year to date. Despite the challenging operating environment brought on by the COVID-19 pandemic, we delivered solid margins, strong free cash flow growth, and adjusted EPS growth,” said John Haley, Willis Towers Watson’s chief executive officer. “The third quarter results are reflective of our prudent cost-management and liquidity preservation efforts. Though there is looming uncertainty around the duration and severity of business disruptions, I am encouraged by the resilience we have demonstrated to date, and we remain confident in our ability to drive improvements and deliver value for our clients and shareholders.”
Third Quarter Company Highlights
Revenue was $2.01 billion for the third quarter of 2020, an increase of 1% (flat constant currency and 1% decrease organic) as compared to $1.99 billion for the same period in the prior year.
For the nine months ended September 30, 2020, revenue was $6.59 billion, an increase of 4% (5% increase constant currency and 1% increase organic) as compared to $6.35 billion for the same period in the prior year.
Income from operations for the third quarter of 2020 was $73 million, or 3.6% of revenue, a decrease of 180 basis points compared to the third quarter of the prior year. Adjusted operating income was $238 million, or 11.8% of revenue, up 20 basis points compared to the third quarter of the prior year. Net income attributable to Willis Towers Watson for the third quarter of 2020 was $121 million, an increase of 61% from $75 million for the prior-year third quarter. For the quarter, diluted earnings per share were $0.93 and adjusted diluted earnings per share were $1.33. Net income attributable to Willis Towers Watson and diluted earnings per share for the third quarter of 2020 included pre-tax $42 million of transaction and integration expenses mostly related to the pending business combination with Aon plc. The U.S. GAAP tax rate for the quarter was 27.6%, and the adjusted income tax rate for the quarter used in calculating adjusted diluted earnings per share was 30.0%.
For the nine months ended September 30, 2020, income from operations was $596 million, or 9.0% of revenue, a decrease of 110 basis points compared to the same period in the prior year. Adjusted operating income was $1.1 billion, or 16.1% of revenue, flat compared to the same period in the prior year. Net income attributable to Willis Towers Watson for the nine months ended September 30, 2020 was $520 million, an increase of 4% from $500 million for the same period in the prior year. For the nine months ended September 30, 2020, diluted earnings per share were $3.99 and adjusted diluted earnings per share were $6.47. Net income attributable to Willis Towers Watson and diluted earnings per share for the nine months ended September 30, 2020 included pre-tax $65 million of transaction and integration expenses mostly related to the pending business combination with Aon plc. For the nine months ended September 30, 2020, the U.S. GAAP tax rate was 27.1%, and the adjusted income tax rate used in calculating adjusted diluted earnings per share was 23.1%.
1 The revenue amounts included in this release are presented on a U.S. GAAP basis except where stated otherwise. The segment discussion is on an organic basis.
Net income for the third quarter of 2020 was $122 million, or 6.1% of revenue, an increase from net income of $80 million, or 4.0% of revenue for the prior-year third quarter. Adjusted EBITDA for the third quarter of 2020 was $382 million, or 19.0% of revenue, an increase from Adjusted EBITDA of $344 million, or 17.3% of revenue.
For the nine months ended September 30, 2020, net income was $537 million, or 8.2% of revenue, an increase from net income of $522 million, or 8.2% of revenue for the same period in the prior year. Adjusted EBITDA for the nine months ended September 30, 2020 was $1.5 billion, or 22.8% of revenue, an increase from Adjusted EBITDA of $1.4 billion, or 21.6% of revenue.
Cash flows from operating activities for the nine months ended September 30, 2020 were $1.2 billion, up 95% compared to $620 million for the prior-year. Free cash flow for the nine months ended September 30, 2020 were $1.0 billion, up 130% compared to $445 million for the prior-year. The increase in cash flows from operations as compared to the prior year was primarily due to positive cash flows from our improved working capital for the nine months ended September 30, 2020 as compared to September 30, 2019. During the nine months ended September 30, 2020, the Company had no share repurchase activity.
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