Willis Towers Watson Public : WTW Q1 2022 Earnings Release

WTW Reports First Quarter 2022 Earnings

April 28, 2022

• • Total revenue1 decreased 3% to $2.2 billion with organic growth of 2%

• • Diluted Earnings per Share were $1.03 for the quarter, down 82% over prior year

• • Adjusted Diluted Earnings per Share were $2.66 for the quarter, up 22% over prior year

• • Income from Operations was $179 million or 8.3% of revenue, with margin down 120 basis points over prior year

• • Adjusted Operating Income was $371 million or 17.2% of revenue, with margin up 200 basis points over prior year

ARLINGTON, VA AND LONDON, April 28, 2022 (GLOBAL NEWSWIRE) - WTW (NASDAQ: WTW) (the "Company"), a leading global advisory, broking and solutions company, today announced financial results for the first quarter ended March 31, 2022.

"The first quarter marked a solid start to the year for WTW with results that were in line with expectations and reflect improved momentum in our business," said Carl Hess, WTW's chief executive officer. "During the quarter, we continued to make significant progress across our strategic priorities. We launched innovative new products, hired at our fastest rate since 2019, simplified our reporting structure, and made headway on transforming our cost structure. As of today, we have executed on our capital allocation strategy, having repurchased $4.1 billion in shares and reaching our 2022 target ahead of schedule. Going forward, we believe we are well-positioned for success, with our industry-leading solutions and teams helping our clients address their most pressing needs in a volatile economic environment. We believe we remain on track to achieve our 2022 financial targets and are confident in our ability to deliver on our long-term goals for the benefit of all our stakeholders."

Consolidated Results

As reported, USD millions, except %

Key Metrics	Q1-22	Q1-21	Y/Y Change
Total Revenue	$2,160	$2,228	Reported (3)% | CC (1)% | Organic 2%
Income from Operations	$179	$211	(15)%
Operating Margin %	8.3%	9.5%	(120) bps
Adjusted Operating Income	$371	$338	10%
Adjusted Operating Margin	17.2%	15.2%	200 bps
Net Income	$125	$736	(83)%
Adjusted Net Income	$315	$284	11%
Diluted EPS	$1.03	$5.63	(82)%
Adjusted Diluted EPS	$2.66	$2.18	22%

Revenue was $2.16 billion for the first quarter of 2022, a decrease of 3% as compared to $2.23 billion for the same period in the prior year. Excluding a 2% foreign currency headwind, revenue decreased 1%. On an organic basis, revenue increased 2%.

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1

The revenue amounts included in this release are presented on a U.S. GAAP basis except where stated otherwise. This excludes reinsurance revenue which is reported in discontinued operations. The segment discussion is on an organic basis.

Adjusted EBITDA for the first quarter of 2022 was $518 million, or 24.0% of revenue, up 6% compared to Adjusted EBITDA of $488 million, or 21.9% of revenue, in the prior-year first quarter. The U.S. GAAP tax rate for the quarter was 27.5%, and the adjusted income tax rate for the quarter used in calculating adjusted diluted earnings per share was 21.1%.

In March 2022, WTW announced its intention to transfer ownership of its Russian subsidiary to local management, who will operate independently in the Russian market. WTW deconsolidated its Russian entities during the quarter. Upon deconsolidating, WTW recorded a non-cash loss on disposal of $57 million, and a non-cash impairment charge of $81 million related to our Russian business. Our non-GAAP measures were adjusted for both the loss on disposal and the impairment charge. WTW's operations in Russia were primarily within our Risk & Broking segment and comprised approximately 1% of consolidated WTW revenue for 2021.

Cash Flow and Capital Allocation

Cash flows from operating activities were $21 million for the three months ended March 31, 2022, compared to cash flows used in operating activities of $128 million for the prior-year first quarter. Free cash flow for the quarters ended March 31, 2022 and 2021 was ($10) million and ($165) million, respectively. During the quarter ended March 31, 2022, the Company repurchased approximately $2.3 billion of WTW stock.

Quarterly Business Highlights

Continued to improve hiring and attrition, with our hiring rate reaching the highest level since 2019. Hiring activity in the quarter was up 23% as compared to the fourth quarter of 2021, while voluntary terminations in the quarter declined 19%.

• • Launched new products and platforms, including Reputational Risk and ESG analytics, and diagnostics in Risk & Broking and the Engage Employee Insights platform in Health, Wealth & Career.

• • Drove significant progress towards realizing the planned $30 million of run-rate cost savings from transformation initiatives in 2022. The transformation program generated an incremental $16 million in total run-rate savings in the quarter while incurring $11 million in restructuring charges and $3 million in capital expenditures.

• • Repurchased 9.9 million shares for $2.3 billion, achieving the $4 billion near-term share repurchase target set at Investor Day.

First Quarter 2022 Segment Highlights

Effective January 1, 2022, the Company realigned to provide its comprehensive offering of services and solutions to clients across two business segments: Health, Wealth & Career ("HWC") and Risk & Broking ("R&B") and three geographies: Europe, International and North America. Prior to January 1, 2022, WTW operated across four segments: Human Capital and Benefits; Corporate Risk and Broking; Investment, Risk and Reinsurance; and Benefits Delivery and Administration. Following the realignment, the two new segments consist of the following businesses:

• • The HWC segment, which includes businesses previously aligned under the Human Capital and Benefits segment, the Benefits Delivery and Administration segment, and the Investment business, which was previously under the Investment, Risk and Reinsurance segment.

• • The R&B segment, which includes businesses previously aligned under the Corporate Risk and Broking segment, as well as the Insurance Consulting and Technology business, which was previously under the Investment, Risk and Reinsurance segment.

Prior-year reconciliations for these new segments are available in an 8-K filed by the Company on March 14, 2022.

Health, Wealth & Career

As reported, USD millions, except %

Health, Wealth & Career	Q1-22	Q1-21	Y/Y Change
Total Revenue	$1,244	$1,233	Reported 1% | CC 3% | Organic 2%
Operating Income	$257	$242	6%
Operating Margin %	20.7%	19.6%	110 bps

The HWC segment had revenue of $1.24 billion, an increase of 1% (3% increase constant currency and 2% increase organic) from $1.23 billion in the prior-year first quarter. Organic growth was led by the Health business, primarily due to an increase in consulting assignments in North America. Career also contributed strong growth, driven by market demand for reward-based advisory services and compensation benchmarking products as new work models become increasingly prevalent. Wealth revenue increased, with growth in the Investment business from its expanded client base. Benefits Delivery & Outsourcing revenue declined as a result of a shift in the timing of revenue, which we expect to normalize on a full-year basis, coupled with lower growth in Medicare Advantage revenue.

Operating margins in the HWC segment increased 110 basis points from the prior-year first quarter to 20.7%, primarily reflecting improved operating leverage.

Risk & Broking

As reported, USD millions, except %

Risk & Broking	Q1-22	Q1-21	Y/Y Change
Total Revenue	$891	$924	Reported (4)% | CC 0% | Organic 0%
Operating Income	$192	$203	(5)%
Operating Margin %	21.6%	21.9%	(30) bps

The R&B segment had revenue of $891 million, a decrease of 4% (0% change for constant currency and organic) from $924 million in the prior-year first quarter. On an organic basis, Insurance Consulting and Technology grew from both increased advisory work and software sales. The growth was largely offset by a decline in revenue in Corporate Risk & Broking due to headwinds from book-of-business sales recorded in the prior year. Excluding book-of-business sales activity, revenue increased modestly, primarily from new business in North America in the FINEX and M&A lines.

Operating margins in the R&B segment decreased 30 basis points from the prior-year first quarter to 21.6%, primarily reflecting a headwind from book-of-business sales recorded in the comparable period.

2022 Outlook

Based on current and anticipated market conditions, the Company is maintaining its 2022 full-year targets as follows:

• • Expect to deliver mid-single digit organic revenue growth

• • Expect to deliver adjusted operating margin expansion for the full year 2022

• • Expect to deliver $30 million in run-rate savings from FY2022 Transformation Program

• • Expect ~$20 million year-over-year decline in non-cash pension income, excluding items that could be favorable or unfavorable in any given period

• • Expect a foreign currency headwind on adjusted earnings per share of approximately $0.15-$0.20 at today's rates

Conference Call

The Company will host a live webcast and conference call to discuss the financial results for the first quarter. It will be held on Thursday, April 28, 2022, beginning at 7:00 a.m. Eastern Time, and can be accessed via the Internet atwww.wtwco.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 for 24 hours at 404-537-3406, conference ID 8493300.

About WTW

At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce and maximize performance. Working shoulder to shoulder with our clients, we uncover opportunities for sustainable success-and provide perspective that moves you. Learn more atwww.wtwco.com.

WTW Non-GAAP Measures

In order to assist readers of our consolidated financial statements in understanding the core operating results that WTW's management uses to evaluate the business and for financial planning, we present the following non-GAAP measures: (1) Constant Currency Change, (2) Organic Change, (3) Adjusted Operating Income/Margin, (4) Adjusted EBITDA/Margin, (5) Adjusted Net Income, (6) Adjusted Diluted Earnings Per Share, (7) Adjusted Income Before Taxes, (8) Adjusted Income Taxes/Tax Rate and (9) Free Cash Flow.

We believe that 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 performance, and in the case of free cash flow, our liquidity results.

Within these measures referred to as 'adjusted', we adjust for significant items which will not be settled in cash, or which we believe to be items that are not core to our current or future operations. Some of these items may not be applicable for the current quarter, however they are expected to be part of our full-year results. These items include the following:

• • Income from discontinued operations, net of tax - Adjustment to remove the after-tax income from discontinued operations and the after-tax gain attributable to the divestiture of our Willis Re business.

• • Restructuring costs and transaction and transformation, net - Management believes it is appropriate to adjust for restructuring costs and transaction and transformation, net when they relate to a specific significant program with a defined set of activities and costs that are not expected to continue beyond a defined period of time, or significant acquisition-related transaction expenses. We believe the adjustment is necessary to present how the Company is performing, both now and in the future when the incurrence of these costs will have concluded.

• • Impairment - Adjustment to remove the impairment related to the net assets of our Russian business that are held outside of our Russian entities.

• • Gains and losses on disposals of operations - Adjustment to remove the gains or losses resulting from disposed operations that have not been classified as discontinued operations.

• • Pension settlement and curtailment gains and losses - Adjustment to remove significant pension settlement and curtailment gains and losses to better present how the Company is performing.

• • Provisions for significant litigation - We will include provisions for litigation matters which we believe are not representative of our core business operations. These amounts are presented net of insurance and other recovery receivables.

• • Tax effect of statutory rate changes - Relates to the incremental tax expense or benefit from significant statutory income tax rate changes enacted in material jurisdictions in which we operate.

• • Tax effect of the Coronavirus Aid, Relief, and Economic Security ('CARES') Act - Relates to the incremental tax expense impact, primarily from the Base Erosion and Anti-Abuse Tax ('BEAT'), generated from electing certain income tax provisions of the CARES Act.

• • Tax effects of internal reorganization - Relates to the U.S. income tax expense resulting from the completion of internal reorganizations of the ownership of certain businesses that reduced the investments held by our U.S.-controlled subsidiaries.

We evaluate our revenue on an as reported (U.S. GAAP), constant currency and organic basis. We believe presenting constant currency and organic information provides valuable supplemental information regarding our comparable results, consistent with how we evaluate our performance internally.

We consider Constant Currency Change, Organic Change, Adjusted Operating Income/Margin, Adjusted EBITDA/Margin, Adjusted Net Income, Adjusted Diluted Earnings Per Share, Adjusted Income Before Taxes, Adjusted Income Taxes/Tax Rate and Free Cash Flow to be important financial measures, which are used to internally evaluate and assess our core operations and to benchmark our operating and liquidity results against our competitors. These non-GAAP measures are important in illustrating what our comparable operating and liquidity results would have been had we not incurred transaction-related and non-recurring items. Our non-GAAP measures and their accompanying definitions are presented as follows:

Constant Currency Change - Represents the year-over-year change in revenue excluding the impact of foreign currency fluctuations. To calculate this impact, the prior year local currency results are first translated using the current year monthly average exchange rates. The change is calculated by comparing the prior year revenue, translated at the current year monthly average exchange rates, to the current year as reported revenue, for the same period. We believe constant currency measures provide useful information to investors because they provide transparency to performance by excluding the effects that foreign currency exchange rate fluctuations have on period-over-period comparability given volatility in foreign currency exchange markets.

Organic Change - Excludes the impact of fluctuations in foreign currency exchange rates, as described above and the period-over-period impact of acquisitions and divestitures on current-year revenue. We believe that excluding transaction-related items from our U.S. GAAP financial measures provides useful supplemental information to our investors, and it is important in illustrating what our core operating results would have been had we not included these transaction-related items, since the nature, size and number of these translation-related items can vary from period to period.

Adjusted Operating Income/Margin - Income from operations adjusted for amortization, restructuring costs, transaction and transformation, net and non-recurring items that, in management's judgment, significantly affect the period-over-period assessment of operating results. Adjusted operating income margin is calculated by dividing adjusted operating income by revenue. We consider adjusted operating income/margin to be important financial measures, which are used internally to evaluate and assess our core operations and to benchmark our operating results against our competitors.

Adjusted EBITDA/Margin - Net Income adjusted for loss/(income) from discontinued operations, net of tax, provision for income taxes, interest expense, depreciation and amortization, restructuring costs, transaction and transformation, net, gains and losses on disposals of operations and non-recurring items that, in management's judgment, significantly affect the period-over-period assessment of operating results. Adjusted EBITDA Margin is calculated by dividing adjusted EBITDA by revenue. We consider adjusted EBITDA/margin to be important financial measures, which are used internally to evaluate and assess our core operations, to benchmark our operating results against our competitors and to evaluate and measure our performance-based compensation plans.

Adjusted Net Income - Net Income Attributable to WTW adjusted for loss/(income) from discontinued operations, net of tax, amortization, restructuring costs, transaction and transformation, net, gains and losses on disposals of operations and non-

recurring items that, in management's judgment, significantly affect the period-over-period assessment of operating results and the related tax effect of those adjustments and the tax effects of internal reorganizations. This measure is used solely for the purpose of calculating adjusted diluted earnings per share.

Adjusted Diluted Earnings Per Share - Adjusted Net Income divided by the weighted-average number of shares of common stock, diluted. Adjusted diluted earnings per share is used to internally evaluate and assess our core operations and to benchmark our operating results against our competitors.

Adjusted Income Before Taxes - Income from operations before income taxes adjusted for amortization, restructuring costs, transaction and transformation, net, gains and losses on disposals of operations and non-recurring items that, in management's judgment, significantly affect the period-over-period assessment of operating results. Adjusted income before taxes is used solely for the purpose of calculating the adjusted income tax rate.

Adjusted Income Taxes/Tax Rate - Provision for income taxes adjusted for taxes on certain items of amortization, restructuring costs, transaction and transformation, net, gains and losses on disposals of operations, the tax effects of internal reorganizations, and non-recurring items that, in management's judgment, significantly affect the period-over-period assessment of operating results, divided by adjusted income before taxes. Adjusted income taxes is used solely for the purpose of calculating the adjusted income tax rate. Management believes that the adjusted income tax rate presents a rate that is more closely aligned to the rate that we would incur if not for the reduction of pre-tax income for the adjusted items and the tax effects of internal reorganizations, which are not core to our current and future operations.

Free Cash Flow - Cash flows from operating activities less cash used to purchase fixed assets and software for internal use.

Free Cash Flow is a liquidity measure and is not meant to represent residual cash flow available for discretionary expenditures.

Management believes that free cash flow presents the core operating performance and cash-generating capabilities of our business operations.