Watson Wyatt Worldwide Reports Second Quarter EPS of $0.93

Watson Wyatt Worldwide, Inc. (NYSE, NASDAQ:WW), a leading international human capital and financial management consulting firm, today announced financial results for the second quarter of fiscal year 2009, which ended December 31, 2008.

Revenues were $436.4 million for the quarter, a decrease of 2% (an increase of 6% on a constant currency basis) from second quarter of fiscal 2008 revenues of $447.0 million. Net income for the second quarter of fiscal 2009 was $39.6 million, or $0.93 per diluted share, an increase from $36.8 million or $0.82 per diluted share in the prior-year second quarter. When compared to the prior-year second quarter, exchange rates had a negative impact of $0.08 on diluted net income per share.

"We’re pleased to have achieved year-over-year earnings growth this quarter, in light of the economic and foreign currency headwinds,” said John Haley, president and chief executive officer. "All of our segments grew on a constant currency basis, with strong performance in our insurance & financial services, technology & administration solutions and benefits groups. Our balance sheet and cash flow remain strong.

"We responded to the financial crisis by quickly reaching out to our clients, understanding their challenges, and tailoring our services to their needs. We’re going to continue to stay close to our clients and manage our business conservatively. As the economic conditions have varying effects on our segments, we are closely monitoring our costs in those areas where there is pressure on our growth.”

Operating Highlights

• Benefits Group revenues (representing 55% of second-quarter revenues) were $240 million for the second quarter of fiscal 2009, a decrease of 2% (increase of 7% constant currency) from $244 million in the prior-year second quarter. The reported decrease in revenues was due primarily to the strengthening of the U.S. Dollar against the British pound and the Euro. The constant currency increase in revenues was largely due to increased demand for retirement consulting services.
• Technology and Administration Solutions Group revenues (representing 12% of second-quarter revenues) were $51 million for the second quarter of fiscal 2009, an increase of 3% (12% constant currency) from $50 million in the prior-year second quarter. Revenues increased in both North America and Europe. In North America, revenues increased due to additional projects at existing clients as well as an increase in the number of projects in on-going service delivery. In Europe, revenues increased due to new clients.
• Human Capital Group revenues (representing 12% of second-quarter revenues) were $51 million for the second quarter of fiscal 2009, a decrease of 4% (increase of 1% constant currency) from $53 million in the prior-year second quarter. The reported decrease in revenues was due primarily to the strengthening of the U.S. dollar against the British pound and the Euro. The constant currency increase in revenues is due primarily to an increase in demand in Europe.
• Insurance & Financial Services Group revenues (representing 8% of second-quarter revenues) were $34 million for the second quarter of fiscal 2009, an increase of 14% (28% constant currency) from $30 million in the prior-year second quarter. The increase in revenues was due primarily to a large project that resulted from the turmoil in the financial services sector.
• Investment Consulting Group revenues (representing 9% of second-quarter revenues) were $37 million for the second quarter of fiscal 2009, a decrease of 12% (increase of 5% constant currency) from $42 million in the prior-year second quarter. The reported decrease in revenues was due primarily to the strengthening of the U.S. dollar against the British pound and the Euro. The constant currency increase in revenues was largely due to increased demand for investment strategy advice.

Outlook for Fiscal Year 2009

After consideration of the volatile foreign exchange markets, the company expects fiscal 2009 revenues in the range of $1.67 billion to $1.72 billion and earnings per diluted share in the range of $3.50 to $3.57. This guidance includes up to $0.35 of foreign currency translation losses from the strengthening of the U.S. dollar. This guidance also anticipates that over the remainder of our fiscal year £1.00 maintains a minimum average value of approximately $1.30 and €1.00 maintains a minimum average value of approximately $1.20.

For the third quarter of fiscal 2009, and after consideration of the volatile foreign exchange markets, the company expects to report revenues in the range of $420 million to $430 million and earnings per diluted share in the range of $0.88 to $0.92. This guidance includes up to $0.15 of foreign currency translation losses from the strengthening of the U.S. dollar. As noted above, this guidance anticipates that in our third quarter of fiscal 2009 £1.00 maintains a minimum average value of approximately $1.30 and €1.00 maintains a minimum average value of approximately $1.20.

Conference Call

The company will host a live webcast and conference call to discuss the financial results for the second quarter of fiscal 2009. It will be held on Thursday, February 5, 2009, beginning at 9:00 a.m. Eastern Time, and can be accessed via the Internet by going to the Investor Relations section of 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 65678869.

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 foreign currency exchange and interest rate fluctuations; general economic and business conditions that adversely affect us or our clients; 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; 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; 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; 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; exposure to liabilities of acquired businesses that have not been expressly assumed; 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, 2008 and filed on August 15, 2008, 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.

About Watson Wyatt Worldwide

Watson Wyatt (NYSE, NASDAQ: WW) is the trusted business partner to the world's leading organizations on people and financial issues. The firm’s global services include: managing the cost and effectiveness of employee benefit programs; developing attraction, retention and reward strategies; advising pension plan sponsors and other institutions on optimal investment strategies; providing strategic and financial advice to insurance and financial services companies; and delivering related technology, outsourcing and data services. Watson Wyatt has 7,700 associates in 32 countries and is located on the Web at www.watsonwyatt.com.