Day: October 31, 2024

CALGARY, Alberta, Oct. 31, 2024 (GLOBE NEWSWIRE) — Cenovus Energy Inc. CVE CVE today announced its financial and operating results for the third quarter of 2024. The company generated nearly $2.5 billion in cash from operating activities, $2.0 billion of adjusted funds flow and $614 million of free funds flow in the quarter. Upstream production of more than 771,000 barrels of oil equivalent per day (BOE/d)¹ was slightly lower compared with the second quarter primarily because of turnaround activity at the Christina Lake oil sands facility. Turnaround impacts to production were lower than forecast, as Christina Lake completed its turnaround ahead of schedule. In the downstream, total throughput increased by about 20,000 barrels per day (bbls/d) from the second quarter to almost 643,000 bbls/d, and a major turnaround was successfully completed at the Lima Refinery.

“We are efficiently and effectively progressing our major projects and our growth plan is on track to deliver increased production that will enhance shareholder returns for the long term,” said Jon McKenzie, Cenovus President & Chief Executive Officer. “With planned upstream and downstream maintenance activities behind us, we’re well positioned to deliver strong operations for the balance of the year and into 2025.”

Recent highlights

• Returned $1.1 billion of cash to shareholders in the third quarter, including $732 million in share purchases and base dividends of $329 million.
• Completed the Christina Lake turnaround safely and well ahead of schedule, resulting in production from the asset exceeding the company’s forecast by 15,000 bbls/d to 20,000 bbls/d in the quarter.
• Completed a major turnaround at the Lima Refinery on schedule, with pipeline connections to the Toledo Refinery enabling Lima crude runs to continue at a reduced rate, avoiding a full shutdown.
• Began production from two new well pads at Sunrise which will ramp up in the fourth quarter, which are part of the Sunrise growth program.
• Completed the SeaRose floating production, storage and offloading (FPSO) vessel asset life extension work with resumed volumes around year end, achieving a critical milestone for the West White Rose project.
• All major projects remain on track to deliver significant growth with West White Rose, Foster Creek optimization, Sunrise growth program and Narrows Lake pipeline progressing as expected.

Third-quarter results

Financial summary

Production and throughput

¹ See Advisory for production by product type.
² Non-GAAP financial measure or contains a non-GAAP financial measure. See Advisory.

Operating results¹

Cenovus’s total revenues were approximately $14.2 billion in the third quarter, down from $14.9 billion in the prior quarter, primarily due to lower commodity prices, which impacted both upstream and downstream results. Planned turnaround activities reduced production, primarily at the Christina Lake oil sands facility and Rainbow Lake conventional operations, as well as in the Atlantic region due to the SeaRose FPSO asset life extension, and reduced throughput at the Lima Refinery.

Upstream revenues were about $7.3 billion, down from $7.9 billion in the second quarter, while downstream revenues were approximately $9.2 billion, up from $9.1 billion in the prior quarter. Total operating margin³ was about $2.4 billion, compared with $2.9 billion in the previous quarter. Upstream operating margin⁴ was approximately $2.7 billion, down from $3.1 billion in the second quarter. The company had a downstream operating margin⁴ shortfall of $323 million in the third quarter as the Lima Refinery underwent a major planned turnaround, compared with a shortfall of $153 million in the previous quarter. In the third quarter, operating margin in U.S. Refining included approximately $209 million of first in, first out (FIFO) losses and about $100 million of turnaround expenses and improvement projects executed during the Lima turnaround.

Total upstream production was 771,300 BOE/d in the third quarter, a decrease of 29,500 BOE/d from the prior quarter due to turnarounds at Christina Lake, Rainbow Lake and other Conventional facilities. Christina Lake production was 211,800 bbls/d, compared to 237,100 bbls/d in the second quarter, as a result of the planned turnaround activity. Production impacted by the Christina Lake turnaround was restored ahead of schedule. Foster Creek and Sunrise production increased quarter-over-quarter, with 198,000 bbls/d at Foster Creek compared with 195,000 bbls/d in the second quarter and Sunrise production of 50,400 bbls/d compared with 46,100 bbls/d in the second quarter. Production from the Lloydminster thermal and Lloydminster conventional heavy assets was 109,400 bbls/d and 16,300 bbls/d respectively, both slightly below the prior quarter.

Production in the Conventional segment was 118,100 BOE/d in the third quarter, a slight decrease from 123,100 BOE/d in the second quarter, as turnaround activities were safely completed at Rainbow Lake and other Conventional facilities.

In the Offshore segment, production was 65,500 BOE/d compared with 66,200 BOE/d in the second quarter. In Asia Pacific, sales volumes were 56,500 BOE/d, slightly lower than the previous quarter due to the completion of planned maintenance on the Liwan offshore platform and at the onshore Gaolan gas plant. In the Atlantic, production was 9,000 bbls/d, up from 8,400 bbls/d in the prior quarter as the non-operated Terra Nova field continues to ramp up to full rates. Planned maintenance work on the SeaRose FPSO was completed at the dry dock in Belfast and the vessel is returning to the White Rose field, with production expected to resume by year end.

Refining throughput in the third quarter was 642,900 bbls/d, an increase from 622,700 bbls/d in the second quarter, primarily due to reduced maintenance activity. Crude throughput in Canadian Refining was 99,400 bbls/d in the third quarter, compared with 53,800 bbls/d in the previous quarter, with the increase primarily due to a major turnaround at the Lloydminster Upgrader which impacted second quarter throughput.

In U.S. Refining, crude throughput was 543,500 bbls/d in the third quarter, compared with 568,900 bbls/d in the second quarter. Throughput decreased primarily due to a major turnaround at the Lima Refinery that commenced in September, which resulted in the plant running at reduced crude throughput rates. Market capture in the U.S. was lower than the previous quarter primarily due to inventory timing impacts, the Lima Refinery turnaround and unplanned outages in secondary units at the operated and non-operated refineries. Subsequent to the quarter, the turnaround at Lima was safely and successfully completed in October.

³ Non-GAAP financial measure. Total operating margin is the total of Upstream operating margin plus Downstream operating margin. See Advisory.
⁴ Specified financial measure. See Advisory.

Financial results

Cash from operating activities in the third quarter, which includes changes in non-cash working capital, was about $2.5 billion, compared with $2.8 billion in the second quarter. Adjusted funds flow was approximately $2.0 billion, compared with $2.4 billion in the prior period and excess free funds flow (EFFF) was $146 million, compared with $735 million in the previous quarter. Third-quarter financial results were impacted by lower benchmark prices, planned turnaround activity, unplanned outages, and a FIFO loss in the U.S. Refining segment. Net earnings in the third quarter were $820 million, compared with $1.0 billion in the previous quarter.

Long-term debt, including the current portion, was $7.2 billion at September 30, 2024. Net debt decreased slightly from the prior quarter to approximately $4.2 billion at September 30, 2024, primarily due to free funds flow of $614 million and a release of non-cash working capital, offset by shareholder returns of $1.1 billion. Following the achievement of the net debt target in July 2024, the company continues to steward toward a net debt level near $4.0 billion and returning 100% of EFFF to shareholders over time in accordance with its financial framework.

Growth projects and capital investments

In the Oil Sands segment, the company continues to progress the tie-back of Narrows Lake, building a 17-kilometre pipeline connecting the reservoir to the Christina Lake processing facility, which will add between 20,000 bbls/d and 30,000 bbls/d of production. The project is approximately 93% constructed, as critical tie-ins to the Narrows Lake pipeline were completed during the Christina Lake turnaround. The project remains on track for first production mid-2025. At Sunrise, as part of the growth program, the company brought two new well pads online in the third quarter, which will continue to ramp up into the fourth quarter. One additional well pad will come online in early 2025. The optimization project at Foster Creek remains on schedule for startup by the middle of 2026, with most modules and major pieces of equipment in place and pipe installation underway. At the Lloydminster conventional heavy oil assets, 20 new production wells were drilled in the third quarter, positioning the company for growth from this business in 2025.

The West White Rose project reached a significant milestone with the completion of the SeaRose FPSO asset life extension work at the dry dock in Belfast. The vessel is now sailing back to the White Rose field where reconnection and commissioning will take place to enable the existing field to resume production by year end. The West White Rose project is now approximately 85% complete and progressing on-schedule.

Dividend declarations and share purchases

The Board of Directors has declared a quarterly base dividend of $0.180 per common share, payable on December 31, 2024 to shareholders of record as of December 13, 2024.

In addition, the Board has declared a quarterly dividend on each of the Cumulative Redeemable First Preferred Shares – Series 1, Series 2, Series 3, Series 5 and Series 7 – payable on December 31, 2024 to shareholders of record as of December 13, 2024 as follows:

Preferred shares dividend summary

All dividends paid on Cenovus’s common and preferred shares will be designated as “eligible dividends” for Canadian federal income tax purposes. Declaration of dividends is at the sole discretion of the Board and will continue to be evaluated on a quarterly basis.

In the third quarter, the company returned approximately $1.1 billion to common shareholders, composed of $732 million from its purchase of 28.4 million shares through its normal course issuer bid (NCIB) and $329 million through base dividends.

Since the share buyback program began in November 2021, as at October 28, Cenovus has purchased approximately 227 million common shares, delivering $5.3 billion in returns to shareholders. The current NCIB will expire on November 8, 2024. Cenovus has received approval from the Board of Directors to apply for another NCIB program. Cenovus will apply for approval to repurchase up to approximately 127 million of the company’s common shares, representing approximately 10% of its public float, as defined by the TSX.

2024 planned maintenance

The following table provides details on planned maintenance activities at Cenovus assets through 2024 and anticipated production or throughput impacts.

Potential quarterly production/throughput impact (Mbbls/d or MBOE/d)

Sustainability

Cenovus’s 2023 Corporate Social Responsibility report was issued in August, highlighting the company’s progress and performance related to safety, Indigenous reconciliation, and inclusion & diversity as well as its approach to governance. Cenovus remains committed to delivering on its environmental projects and performance, however recent changes to Canada’s Competition Act has created uncertainty and risk around the company’s ability to speak publicly about its actions.

Conference call today
8 a.m. Mountain Time (10 a.m. Eastern Time)

Cenovus will host a conference call today, October 31, 2024, starting at 8 a.m. MT (10 a.m. ET).

To join the conference call, please dial 888-307-2440 (toll-free in North America) or 647-694-2812 to reach a live operator who will join you into the call. A live audio webcast will also be available and archived for approximately 30 days.

Advisory

Basis of Presentation

Cenovus reports financial results in Canadian dollars and presents production volumes on a net to Cenovus before royalties basis, unless otherwise stated. Cenovus prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) Accounting Standards.

Barrels of Oil Equivalent

Natural gas volumes have been converted to barrels of oil equivalent (BOE) on the basis of six thousand cubic feet (Mcf) to one barrel (bbl). BOE may be misleading, particularly if used in isolation. A conversion ratio of one bbl to six Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil compared with natural gas is significantly different from the energy equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is not an accurate reflection of value.

Product types

Forward‐looking Information

This news release contains certain forward‐looking statements and forward‐looking information (collectively referred to as “forward‐looking information”) within the meaning of applicable securities legislation about Cenovus’s current expectations, estimates and projections about the future of the company, based on certain assumptions made in light of the company’s experiences and perceptions of historical trends. Although Cenovus believes that the expectations represented by such forward‐looking information are reasonable, there can be no assurance that such expectations will prove to be correct. Forward‐looking information in this document is identified by words such as “anticipate”, “continue”, “deliver”, “expect”, “focus”, “plan”, “progress”, “steward”, “target” and “will” or similar expressions and includes suggestions of future outcomes, including, but not limited to, statements about:   returning Excess Free Funds Flow to shareholders; shareholder returns, including renewing the company’s normal course issuer bid; safety; growth plans and projects; Net Debt; production guidance; the optimization project at Foster Creek; the tie-back of Narrows Lake to Christina Lake; amount and timing of production at Narrows Lake; production and timing of well pads at Sunrise; drilling activity and production at the Conventional Heavy Oil assets; return of the Sea Rose FPSO to the White Rose Field and return of production; the construction of the West White Rose project; 2024 planned maintenance; and dividend payments.

Developing forward‐looking information involves reliance on a number of assumptions and consideration of certain risks and uncertainties, some of which are specific to Cenovus and others that apply to the industry generally. The factors or assumptions on which the forward‐looking information in this news release are based include, but are not limited to: the allocation of free funds flow; commodity prices, inflation and supply chain constraints; Cenovus’s ability to produce on an unconstrained basis; Cenovus’s ability to access sufficient insurance coverage to pursue development plans; Cenovus’s ability to deliver safe and reliable operations and demonstrate strong governance; and the assumptions inherent in Cenovus’s 2024 corporate guidance available on cenovus.com.

The risk factors and uncertainties that could cause actual results to differ materially from the forward‐looking information in this news release include, but are not limited to: the accuracy of estimates regarding commodity production and operating expenses, inflation, taxes, royalties, capital costs and currency and interest rates; risks inherent in the operation of Cenovus’s business; and risks associated with climate change and Cenovus’s assumptions relating thereto and other risks identified under “Risk Management and Risk Factors” and “Advisory” in Cenovus’s Management’s Discussion and Analysis (MD&A) for the year ended December 31, 2023.

Except as required by applicable securities laws, Cenovus disclaims any intention or obligation to publicly update or revise any forward‐looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned that the foregoing lists are not exhaustive and are made as at the date hereof. Events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward‐looking information. For additional information regarding Cenovus’s material risk factors, the assumptions made, and risks and uncertainties which could cause actual results to differ from the anticipated results, refer to “Risk Management and Risk Factors” and “Advisory” in Cenovus’s MD&A for the periods ended December 31, 2023 and September 30, 2024, and to the risk factors, assumptions and uncertainties described in other documents Cenovus files from time to time with securities regulatory authorities in Canada (available on SEDAR+ at sedarplus.ca, on EDGAR at sec.gov and Cenovus’s website at cenovus.com.)

Specified Financial Measures

This news release contains references to certain specified financial measures that do not have standardized meanings prescribed by IFRS Accounting Standards. Readers should not consider these measures in isolation or as a substitute for analysis of the company’s results as reported under IFRS Accounting Standards. These measures are defined differently by different companies and, therefore, might not be comparable to similar measures presented by other issuers. For information on the composition of these measures, as well as an explanation of how the company uses these measures, refer to the Specified Financial Measures Advisory located in Cenovus’s MD&A for the period ended September 30, 2024 (available on SEDAR+ at sedarplus.ca, on EDGAR at sec.gov and on Cenovus’s website at cenovus.com) which is incorporated by reference into this news release.

Upstream Operating Margin and Downstream Operating Margin

Upstream Operating Margin and Downstream Operating Margin, and the individual components thereof, are included in Note 1 to the interim Consolidated Financial Statements.

Total Operating Margin

Total Operating Margin is the total of Upstream Operating Margin plus Downstream Operating Margin.

⁵ Found in the September 30, 2024, or the June 30, 2024, interim Consolidated Financial Statements.

Adjusted Funds Flow, Free Funds Flow and Excess Free Funds Flow

The following table provides a reconciliation of cash from (used in) operating activities found in Cenovus’s Consolidated Financial Statements to Adjusted Funds Flow, Free Funds Flow and Excess Free Funds Flow. Adjusted Funds Flow per Share – Basic and Adjusted Funds Flow per Share – Diluted are calculated by dividing Adjusted Funds Flow by the respective basic or diluted weighted average number of common shares outstanding during the period and may be useful to evaluate a company’s ability to generate cash.

⁵ Found in the September, 30, 2024, or the June 30, 2024, interim Consolidated Financial Statements.

Cenovus Energy Inc.

Cenovus Energy Inc. is an integrated energy company with oil and natural gas production operations in Canada and the Asia Pacific region, and upgrading, refining and marketing operations in Canada and the United States. The company is focused on managing its assets in a safe, innovative and cost-efficient manner, integrating environmental, social and governance considerations into its business plans. Cenovus common shares and warrants are listed on the Toronto and New York stock exchanges, and the company’s preferred shares are listed on the Toronto Stock Exchange. For more information, visit cenovus.com.

Find Cenovus on Facebook, X, LinkedIn, YouTube and Instagram.

Cenovus contacts

Investors
Investor Relations general line
403-766-7711

Media
Media Relations general line
403-766-7751

• Revenue¹ increased 6% to $2.3 billion for the quarter with organic growth of 6% for the quarter
• Diluted Loss² per Share was $16.44 for the quarter
• Adjusted Diluted Earnings per Share were $2.93 for the quarter, up 31% from prior year
• Operating Margin² was (33.5)% for the quarter
• Adjusted Operating Margin was 18.1% for the quarter, up 190 basis points from prior year
  

LONDON, Oct. 31, 2024 (GLOBE NEWSWIRE) — WTW WTW (the “Company”), a leading global advisory, broking and solutions company, today announced financial results for the third quarter ended September 30, 2024.

“We had another strong quarter fueled by revenue growth, operating leverage and the success of our Transformation program. Our revenue growth of 6% for the quarter is evidence that our value proposition is continuing to resonate in the market and that our investments in talent and technology are succeeding. We are also making ongoing progress on our commitment to improve cash flow. Given our strong performance and momentum, we are entering the fourth quarter with confidence in our ability to deliver on our targets for the year and drive sustainable, profitable growth going forward.”

Consolidated Results

As reported, USD millions, except %

Revenue was $2.29 billion for the third quarter of 2024, an increase of 6% as compared to $2.17 billion for the same period in the prior year. Excluding the impact of foreign currency, revenue increased 6%. On an organic basis, revenue increased 6%. See Supplemental Segment Information for additional detail on book-of-business settlements and interest income included in revenue.

Net Loss for the third quarter of 2024 was $1.67 billion compared to Net Income of $139 million in the prior-year third quarter. Loss from Operations, Operating Margin, Net Loss and Diluted EPS for the third quarter of 2024 include pre-tax non-cash losses and impairment charges of over $1.0 billion each related to the pending sale of TRANZACT. Adjusted EBITDA for the third quarter was $501 million, or 21.9% of revenue, an increase of 15%, compared to Adjusted EBITDA of $436 million, or 20.1% of revenue, in the prior-year third quarter. The U.S. GAAP tax rate for the third quarter was 16.1%, and the adjusted income tax rate for the third quarter used in calculating adjusted diluted earnings per share was 19.7%.

Cash Flow and Capital Allocation

Cash flows from operating activities were $913 million for the nine months ended September 30, 2024, compared to $823 million for the prior year. Free cash flow for the nine months ended September 30, 2024 and 2023 was $807 million and $707 million, respectively, an increase of $100 million, primarily driven by operating margin expansion, partially offset by cash outflows related to transformation and discretionary compensation payments. During the quarter ended September 30, 2024, the Company repurchased $205 million of WTW outstanding shares.

Third Quarter 2024 Segment Highlights

Health, Wealth & Career (“HWC”)

As reported, USD millions, except %

The HWC segment had revenue of $1.33 billion in the third quarter of 2024, an increase of 4% (3% increase constant currency and 4% organic) from $1.28 billion in the prior year. Health had organic revenue growth driven by strong client retention, new local appointments and the continued expansion of our Global Benefits Management client portfolio in International and Europe, along with increased brokerage income in North America. Wealth generated organic revenue growth from higher levels of Retirement work in Europe, an increase in our Investments business due to capital market improvements and growth from our LifeSight solution. Career had organic revenue growth from increased compensation survey sales and advisory services in Work & Rewards and product revenue in Employee Experience. Benefits Delivery & Outsourcing (BD&O) had an organic revenue decline for the quarter primarily as a result of deliberately moderating growth in Individual Marketplace and a stronger comparable in Outsourcing.

Operating margins in the HWC segment increased 90 basis points from the prior-year third quarter to 24.7%, primarily from Transformation savings. Please refer to the Supplemental Slides for TRANZACT’s standalone historical financial results.

Risk & Broking (“R&B”)

As reported, USD millions, except %

The R&B segment had revenue of $940 million in the third quarter of 2024, an increase of 10% (10% increase constant currency and organic) from $855 million in the prior year. Corporate Risk & Broking (CRB) had organic revenue growth driven by higher levels of new business activity and strong client retention. Insurance Consulting and Technology (ICT) had organic revenue growth for the quarter primarily due to strong software sales in Technology, partially offset by tempered demand for discretionary services in Consulting.

Operating margins in the R&B segment increased 240 basis points from the prior-year third quarter to 18.1%, primarily due to operating leverage driven by organic revenue growth and disciplined expense management, as well as Transformation savings.

2024 Outlook

Based on current and anticipated market conditions, the Company’s full-year targets for 2024, consistent with those targets that have been previously provided, are as follows. Refer to the Supplemental Slides for additional detail.

• Expect to deliver revenue of $9.9 billion or greater and mid-single digit organic revenue growth for the full year 2024
• Expect to deliver adjusted operating margin of 23.0% – 23.5% for the full year 2024
• Expect to deliver adjusted diluted earnings per share of $16.00 – $17.00 for the full year 2024
• Expect approximately $88 million in non-cash pension income for the full year 2024
• Expect a foreign currency headwind on adjusted earnings per share of approximately $0.06 for the full year 2024 at today’s rates, down from $0.10 previously
• Expect to deliver approximately $450 million of cumulative run-rate savings from the Transformation program by the end of 2024 with total program costs of $1.175 billion.

Outlook includes Non-GAAP financial measures. We do not reconcile forward-looking Non-GAAP measures for reasons explained below.

In addition, WTW will host an Investor Day on Tuesday, December 3, 2024 beginning at approximately 9:00 a.m. Eastern Time. A live webcast presentation will be available at www.wtwco.com and a replay of the webcast will be available on the Company’s website following the event.

Conference Call

The Company will host a live webcast and conference call to discuss the financial results for the third quarter 2024. It will be held on Thursday, October 31, 2024, beginning at 9:00 a.m. Eastern Time. A live broadcast of the conference call will be available on WTW’s website here. The conference call will include a question-and-answer session. To participate in the question-and-answer session, please register here. An online replay will be available at www.wtwco.com shortly after the call concludes.

About WTW

At WTW 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 at www.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, (9) Free Cash Flow and (10) Free Cash Flow Margin.

We believe that those measures are relevant and provide pertinent 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 the 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 may be part of our full-year results. Additionally, we have historically adjusted for certain items which are not described below, but for which we may adjust in a future period when applicable. Items applicable to the quarter or full year results, or the comparable periods, include the following:

• Restructuring costs and transaction and transformation – Management believes it is appropriate to adjust for restructuring costs and transaction and transformation 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 non-cash goodwill impairment associated with our Benefits, Delivery and Administration reporting unit related to the pending divestiture of our TRANZACT business.
• Provisions for specified litigation matters – We will include provisions for litigation matters which we believe are not representative of our core business operations. Among other things, we determine this by reference to the amount of the loss (net of insurance and other recovery receivables) and by reference to whether the matter relates to an unusual and complex scenario that is not expected to be repeated as part of our ongoing, ordinary business. These amounts are presented net of insurance and other recovery receivables. See the footnotes to the respective reconciliation tables below for more specificity on the litigation matter excluded from adjusted results.
• 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.
• Tax effect of significant adjustments – Relates to the incremental tax expense or benefit resulting from significant or unusual events including significant statutory tax rate changes enacted in material jurisdictions in which we operate, internal reorganizations of ownership of certain businesses that reduced the investment held by our U.S.-controlled subsidiaries and the recovery of certain refunds or payment of taxes related to businesses in which we no longer participate.

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. Reconciliations of these measures are included in the accompanying tables with the following exception: The Company does not reconcile its forward-looking non-GAAP financial measures to the corresponding U.S. GAAP measures, due to variability and difficulty in making accurate forecasts and projections and/or certain information not being ascertainable or accessible; and because not all of the information, such as foreign currency impacts necessary for a quantitative reconciliation of these forward-looking non-GAAP financial measures to the most directly comparable U.S. GAAP financial measure, is available to the Company without unreasonable efforts. For the same reasons, the Company is unable to address the probable significance of the unavailable information. The Company provides non-GAAP financial measures that it believes will be achieved, however it cannot accurately predict all of the components of the adjusted calculations and the U.S. GAAP measures may be materially different than the non-GAAP measures.

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 transaction-related items can vary from period to period.

Adjusted Operating Income/Margin – (Loss)/Income from operations adjusted for impairment, amortization, restructuring costs, transaction and transformation 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 (Loss)/Income adjusted for provision for income taxes, interest expense, impairment, depreciation and amortization, restructuring costs, transaction and transformation, 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 (Loss)/Income Attributable to WTW adjusted for impairment, amortization, restructuring costs, transaction and transformation, 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 ordinary shares, 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 – (Loss)/Income from operations before income taxes adjusted for impairment, amortization, restructuring costs, transaction and transformation, 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 – Benefit from/(provision for) income taxes adjusted for taxes on certain items of impairment, amortization, restructuring costs, transaction and transformation, 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.

Free Cash Flow Margin – Free Cash Flow as a percentage of revenue, which represents how much of revenue would be realized on a cash basis. We consider this measure to be a meaningful metric for tracking cash conversion on a year-over-year basis due to the non-cash nature of our pension income, which is included in our GAAP and Non-GAAP earnings metrics presented herein.

These non-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-GAAP measures should be considered in addition to, and not as a substitute for, the information contained within our condensed consolidated financial statements.

WTW Forward-Looking Statements

This document contains ‘forward-looking statements’ within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created by those laws. These forward-looking statements include information about possible or assumed future results of our operations. All statements, other than statements of historical facts, that address activities, events, or developments that we expect or anticipate may occur in the future, including such things as our outlook, plans and references to future performance, including our future financial and operating results (including our revenue, costs, or margins), short-term and long-term financial goals, plans, objectives, expectations and intentions, including with respect to organic revenue growth, free cash flow generation, adjusted net revenue, adjusted operating margin and adjusted earnings per share; future share repurchases; demand for our services and competitive strengths; strategic goals; existing and evolving business strategies including those related to acquisition and disposition activity; the benefits of new initiatives; the growth of our business and operations; the sustained health of our product, service, transaction, client, and talent assessment and management pipelines; our ability to successfully manage ongoing leadership, organizational, and technology changes, including investments in improving systems and processes; our ability to implement and realize anticipated benefits of any cost-savings initiatives including our multi-year operational transformation program; the potential impact of natural or man-made disasters like health pandemics and other world health crises; future capital expenditures; ongoing working capital efforts; the impact of changes to tax laws on our financial results; and our recognition of future impairment charges or write-off of receivables, are forward-looking statements. Also, when we use words such as ‘may’, ‘will’, ‘would’, ‘anticipate’, ‘believe’, ‘estimate’, ‘expect’, ‘intend’, ‘plan’, ‘continues’, ‘seek’, ‘target’, ‘goal’, ‘focus’, ‘probably’, or similar expressions, we are making forward-looking statements. Such statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. All forward-looking disclosure is speculative by its nature.

There are important risks, uncertainties, events and factors that could cause our actual results or performance to differ materially from those in the forward-looking statements contained in this document, including the following: our ability to successfully establish, execute and achieve our global business strategy as it evolves; our ability to fully realize the anticipated benefits of our growth strategy, including inorganic growth through acquisitions; our ability to make divestitures, including the pending sale of our TRANZACT business (inclusive of all the legal entities that comprise such business), or acquisitions, including our ability to integrate or manage acquired businesses or de-integrate businesses to be disposed, as well as our ability to identify and successfully execute on opportunities for strategic collaboration; our ability to consummate the pending sale of TRANZACT, and related incremental risks associated therewith including our ability to obtain approval (or for applicable waiting periods to expire) under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976; our ability to successfully manage ongoing organizational changes, including as part of our multi-year operational transformation program, investments in improving systems and processes, and in connection with our acquisition and divestiture activities, including the pending sale of TRANZACT, and related to changes in leadership in any of our businesses; risks relating to changes in our management structures and in senior leadership; our ability to achieve our short-term and long-term financial goals, such as with respect to our cash flow generation, and the timing with respect to such achievement; the risks related to changes in general economic conditions, business and political conditions, changes in the financial markets, inflation, credit availability, increased interest rates and changes in trade policies; the risks to our short-term and long-term financial goals from any of the risks or uncertainties set forth herein; the risks relating to the adverse impacts of macroeconomic trends, including inflation, changes in interest rates and trade policies, as well as political events, war, such as the Russia-Ukraine and Middle East conflicts, and other international disputes, terrorism, natural disasters, public health issues and other business interruptions on the global economy and capital markets, which could have a material adverse effect on our business, financial condition, results of operations, and long-term goals; our ability to successfully hedge against fluctuations in foreign currency rates; the risks relating to the adverse impacts of natural or man-made disasters such as health pandemics and other world health crises on the demand for our products and services, our cash flows and our business operations; material interruptions to or loss of our information processing capabilities, or failure to effectively maintain and upgrade our information technology resources and systems and related risks of cybersecurity breaches or incidents; our ability to comply with complex and evolving regulations related to data privacy, cybersecurity, and artificial intelligence; the risks relating to the transitional arrangements in effect subsequent to our previously-completed sale of Willis Re to Arthur J. Gallagher & Co.; significant competition that we face and the potential for loss of market share and/or profitability; the impact of seasonality and differences in timing of renewals and non-recurring revenue increases from disposals and book-of-business sales; the insufficiency of client data protection, potential breaches of information systems or insufficient safeguards against cybersecurity breaches or incidents; the risk of increased liability or new legal claims arising from our new and existing products and services, and expectations, intentions and outcomes relating to outstanding litigation; the risk of substantial negative outcomes on existing litigation or investigation matters; changes in the regulatory environment in which we operate, including, among other risks, the impacts of pending competition law and regulatory investigations; various claims, government inquiries or investigations or the potential for regulatory action; our ability to integrate direct-to-consumer sales and marketing solutions with our existing offerings and solutions; disasters or business continuity problems; our ability to successfully enhance our billing, collection and other working capital efforts, and thereby increase our free cash flow; our ability to properly identify and manage conflicts of interest; reputational damage, including from association with third parties; reliance on third-party service providers and suppliers; the loss of key employees or a large number of employees and rehiring rates; our ability to maintain our corporate culture; doing business internationally, including the impact of foreign currency exchange rates; compliance with extensive government regulation; the risk of sanctions imposed by governments, or changes to associated sanction regulations (such as sanctions imposed on Russia) and related counter-sanctions; our ability to effectively apply technology, data and analytics changes for internal operations, maintaining industry standards and meeting client preferences; changes and developments in the insurance industry or the U.S. healthcare system, including those related to Medicare, any legislative actions from the current U.S. Congress, the recent Final Rule from the Centers for Medicare & Medicaid Services for contract year 2025 and any judicial claims, rulings and appeals related thereto, and any other changes and developments in legal, regulatory, economic, business or operational conditions that could impact our Medicare benefits businesses such as TRANZACT; the inability to protect our intellectual property rights, or the potential infringement upon the intellectual property rights of others; fluctuations in our pension assets and liabilities and related changes in pension income, including as a result of, related to, or derived from movements in the interest rate environment, investment returns, inflation, or changes in other assumptions that are used to estimate our benefit obligations and their effect on adjusted earnings per share; our capital structure, including indebtedness amounts, the limitations imposed by the covenants in the documents governing such indebtedness and the maintenance of the financial and disclosure controls and procedures of each; our ability to obtain financing on favorable terms or at all; adverse changes in our credit ratings; the impact of recent or potential changes to U.S. or foreign laws, and the enactment of additional, or the revision of existing, state, federal, and/or foreign laws and regulations, recent judicial decisions and development of case law, other regulations and any policy changes and legislative actions, including those that may impose additional excise taxes or impact our effective tax rate; U.S. federal income tax consequences to U.S. persons owning at least 10% of our shares; changes in accounting principles, estimates or assumptions; our recognition of non-cash pre-tax losses and related impairment charges in connection with our pending sale of TRANZACT and other future impairment charges or write-offs of receivables; risks relating to or arising from environmental, social and governance practices; fluctuation in revenue against our relatively fixed or higher than expected expenses; the risk that investment levels, including cash spending, to achieve additional expected savings under our multi-year operational transformation program; the laws of Ireland being different from the laws of the U.S. and potentially affording less protections to the holders of our securities; and our holding company structure potentially preventing us from being able to receive dividends or other distributions in needed amounts from our subsidiaries.

The foregoing list of factors is not exhaustive and new factors may emerge from time to time that could also affect actual performance and results. For more information, please see Part I, Item 1A in our Annual Report on Form 10-K, and our subsequent filings with the SEC. Copies are available online at www.sec.gov or www.wtwco.com.

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and therefore also the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. Given the significant uncertainties inherent in the forward-looking statements included in this document, our inclusion of this information is not a representation or guarantee by us that our objectives and plans will be achieved.

Our forward-looking statements speak only as of the date made, and we will not update these forward-looking statements unless the securities laws require us to do so. With regard to these risks, uncertainties and assumptions, the forward-looking events discussed in this document may not occur, and we caution you against unduly relying on these forward-looking statements.

Contact

INVESTORS

Claudia De La Hoz | Claudia.Delahoz@wtwco.com

⁽ⁱ⁾  Components of revenue change may not add due to rounding.
⁽ⁱⁱ⁾  Interest income did not contribute to organic change for the three and nine months ended September 30, 2024.

BOOK-OF-BUSINESS SETTLEMENTS AND INTEREST INCOME

SEGMENT OPERATING INCOME ⁽ⁱ⁾

⁽ⁱ⁾ Segment operating income excludes certain costs, including amortization of intangibles, restructuring costs, transaction and transformation expenses, certain litigation provisions, and to the extent that the actual expense based upon which allocations are made differs from the forecast/budget amount, a reconciling item will be created between internally-allocated expenses and the actual expenses reported for U.S. GAAP purposes.

SEGMENT OPERATING MARGINS

RECONCILIATIONS OF SEGMENT OPERATING INCOME TO (LOSS)/INCOME FROM OPERATIONS BEFORE INCOME TAXES

 ⁽ⁱ⁾ Represents the non-cash goodwill impairment associated with our BDA reporting unit related to the pending divestiture of our TRANZACT business.
 ⁽ⁱⁱ⁾ In 2024 and 2023, in addition to legal fees and other transaction costs, includes primarily consulting fees and compensation costs related to the Transformation program.
 ⁽ⁱⁱⁱ⁾ Includes certain costs, primarily related to corporate functions which are not directly related to the segments, and certain differences between budgeted expenses determined at the beginning of the year and actual expenses that we report for U.S. GAAP purposes.

WTW
Reconciliations of Non-GAAP Measures
(In millions of U.S. dollars, except per share data)
(Unaudited)

RECONCILIATIONS OF NET (LOSS)/INCOME ATTRIBUTABLE TO WTW TO ADJUSTED DILUTED EARNINGS PER SHARE

 ⁽ⁱ⁾ Represents a provision related to potential litigation arising out of a structured insurance program originally placed for a client over 15 years ago. The program is of a type and complexity that was highly bespoke to the client and for that reason is unlikely to be exactly replicated elsewhere. Because of this, while we do not believe the potential litigation is material, we believe excluding this matter from adjusted results makes results more comparable from period to period and more representative of our core business operations.
⁽ⁱⁱ⁾ The tax effect was calculated using an effective tax rate for each item.
⁽ⁱⁱⁱ⁾ Per share values and totals may differ due to rounding.

RECONCILIATIONS OF NET (LOSS)/INCOME TO ADJUSTED EBITDA

 ⁽ⁱ⁾ Represents a provision related to potential litigation arising out of a structured insurance program originally placed for a client over 15 years ago. The program is of a type and complexity that was highly bespoke to the client and for that reason is unlikely to be exactly replicated elsewhere. Because of this, while we do not believe the potential litigation is material, we believe excluding this matter from adjusted results makes results more comparable from period to period and more representative of our core business operations.

RECONCILIATIONS OF (LOSS)/INCOME FROM OPERATIONS TO ADJUSTED OPERATING INCOME

 ⁽ⁱ⁾ Represents a provision related to potential litigation arising out of a structured insurance program originally placed for a client over 15 years ago. The program is of a type and complexity that was highly bespoke to the client and for that reason is unlikely to be exactly replicated elsewhere. Because of this, while we do not believe the potential litigation is material, we believe excluding this matter from adjusted results makes results more comparable from period to period and more representative of our core business operations.

RECONCILIATIONS OF GAAP INCOME TAXES/TAX RATE TO ADJUSTED INCOME TAXES/TAX RATE

⁽ⁱ⁾ Represents a provision related to potential litigation arising out of a structured insurance program originally placed for a client over 15 years ago. The program is of a type and complexity that was highly bespoke to the client and for that reason is unlikely to be exactly replicated elsewhere. Because of this, while we do not believe the potential litigation is material, we believe excluding this matter from adjusted results makes results more comparable from period to period and more representative of our core business operations.
⁽ⁱⁱ⁾ The tax effect was calculated using an effective tax rate for each item.

RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES TO FREE CASH FLOW

 (i)  Equity includes (a) Ordinary shares $0.000304635 nominal value; Authorized 1,510,003,775; Issued 100,887,015 (2024) and 102,538,072 (2023); Outstanding 100,871,441 (2024) and 102,538,072 (2023) and (b) Preference shares, $0.000115 nominal value; Authorized 1,000,000,000 and Issued none in 2024 and 2023.

(i)  The amounts of cash, cash equivalents and restricted cash, their respective classification on the condensed consolidated balance sheets, as well as their respective portions of the increase or decrease in cash, cash equivalents and restricted cash for each of the periods presented have been included in the Supplemental Disclosures of Cash Flow Information section.

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

⁽ⁱ⁾ Does not include the effect of exchange rate changes on cash, cash equivalents and restricted cash.