Watson Wyatt Worldwide Reports Third Quarter EPS of $0.96, up 26 Percent from Prior Year

Business Wire,  May 8, 2008  

Tags: Watson Wyatt Worldwide

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Fiscal Year EPS Guidance Increased

ARLINGTON, Va. -- Watson Wyatt Worldwide, Inc. (NYSE, NASDAQ: WW), a leading international human capital and financial management consulting firm, today announced financial results for the third quarter of fiscal year 2008, which ended March 31, 2008.

Revenues were $457.5 million for the quarter, an increase of 16% (14% constant currency) from the third quarter of fiscal 2007 revenues of $395.6 million. Excluding the impact of acquisitions and changes in foreign exchange rates, revenues increased 6% from the third quarter of fiscal 2007. Net income for the third quarter of fiscal 2008 was $42.5 million, or $0.96 per diluted share, an increase from $33.8 million or $0.76 per diluted share in the prior-year third quarter. When compared to prior-year third quarter, exchange rates had a positive impact of $0.01 per diluted share on net income.

"The Company performed well this quarter, as we continued to benefit from our global, diversified platform," said John Haley, president and chief executive officer. "We are quite pleased with our ongoing revenue growth and resulting margin improvements."

Operating Highlights

* Benefits Group revenues (representing 59% of third-quarter revenues) were $268 million for the third quarter of fiscal 2008, an increase of 21% (20% constant currency) from $221 million in the prior-year third quarter. Excluding the impact of acquisitions and changes in foreign exchange rates, revenues increased 6% from prior year. The increase in organic revenues was largely due to increased demand for valuation, plan design and pension administration services.

* Technology and Administration Solutions Group revenues (representing 10% of third-quarter revenues) were $45 million for the third quarter of fiscal 2008, an increase of 14% (14% constant currency) from $39 million in the prior-year third quarter. The increase in reported revenues resulted primarily from an increase in administration services in both North America and Europe. The number of projects in service in North America increased to 121 at March 31, 2008, as compared to 76 at March 31, 2007. We have an additional 56 projects in the implementation phase in North America.

* Human Capital Group revenues (representing 11% of third-quarter revenues) were $49 million for the third quarter of fiscal 2008, an increase of 19% (18% constant currency) from $41 million in the prior-year third quarter. Demand for our services was strong in all geographic regions.

* Insurance & Financial Services Group revenues (representing 7% of third-quarter revenues) were $31 million for the third quarter of fiscal 2008, an increase of 2% (1% constant currency) from $30 million in the prior-year third quarter. The increase was largely due to growth in Asia Pacific.

* Investment Consulting Group revenues (representing 10% of third-quarter revenues) were $43 million for the third quarter of fiscal 2008, an increase of 27% (25% constant currency) from $34 million in the prior-year third quarter. The revenue increase was due to strong demand for all services, particularly advice on investment strategy.

Outlook for Fiscal Year 2008

For fiscal year 2008, the company expects revenues to be in the range of $1.72 billion to $1.73 billion and earnings per diluted share for the year are expected to be in the range of $3.29 to $3.32. This guidance assumes an average exchange rate of 1.95 U.S. dollars to the British pound for the fourth quarter of fiscal year 2008.

For the fourth quarter of fiscal 2008, the company expects revenues to be in the range of $415 million to $425 million and earnings per diluted share for the quarter are expected to be in the range of $0.74 to $0.77.

Conference Call

The company will host a live webcast and conference call to discuss the financial results for the third quarter of fiscal 2008. It will be held on Thursday, May 8, 2008, beginning at 9:00 a.m. Eastern Time, and can be accessed via the Internet by going to www.watsonwyatt.com. The replay of the webcast will be available two hours after the live call for a period of three months. The replay also will be available for one week after the call by dialing 617-801-6888 and using confirmation number 85045287.

Forward-Looking Statements

Statements in this press release regarding projections and expectations of future earnings, revenues, operations, business trends and other such items are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management's beliefs, as well as assumptions made by, and information currently available to management. Because such statements are based on expectations and are not statements of fact, actual events and results may differ materially from those projected. A number of risks and uncertainties exist which could cause actual results to differ materially from the results reflected in these forward-looking statements. Such factors include but are not limited to the company's ability to integrate the operations of acquired businesses into our own business, processes and systems, and achieve the anticipated results; our continued ability to recruit and retain qualified associates; the success of our marketing, client development and sales programs; the successful exit of the multi-employer retirement business; our ability to maintain client relationships and to attract new clients; declines in demand for our services; outcomes of pending or future litigation and the availability and capacity of professional liability insurance to fund pending or future judgments or settlements; the ability of the company to obtain professional liability insurance; a significant decrease in the demand for the consulting, actuarial and other services we offer as a result of changing economic conditions or other factors; actions by competitors offering human resources consulting services, including public accounting and consulting firms, technology consulting firms and internet/intranet development firms; our continued ability to achieve cost reductions; foreign currency exchange and interest rate fluctuations; exposure to liabilities of acquired businesses that have not been expressly assumed; general economic and business conditions that adversely affect us or our clients; the level of capital resources required for future acquisitions and business opportunities; regulatory developments abroad and domestically that impact our business practices; legislative and technological developments that may affect the demand for or costs of our services; and other factors discussed under "Risk Factors" in the company's Annual Report on Form 10-K for the year ended June 30, 2007 and filed on August 24, 2007, with the Securities and Exchange Commission. These statements are based on assumptions that may not come true. All forward-looking disclosure is speculative by its nature. The company undertakes no obligation to update any of the forward-looking information included in this report, whether as a result of new information, future events, changed expectations or otherwise.