Hewitt Associates, Inc Robert W. Baird Business Solutions Conference

Transcription

1 February 26, 2009 Hewitt Associates, Inc Robert W. Baird Business Solutions Conference

2 Forward-Looking Statements and Non-GAAP Financial Measures This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Such statements are based upon the current beliefs and expectations of Hewitt's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied include general economic conditions and the factors discussed under the Risk Factors heading in the Business section of the Company s most recent annual report on Form 10-K filed with the Securities and Exchange Commission ("SEC") and available at the SEC's internet site ( Hewitt disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or any other reason. This presentation contains non-gaap financial measures. The Company assesses such measures, in conjunction with GAAP financial measures, to better understand underlying business performance. Information reconciling non-gaap to GAAP financial measures can be found in the appendix to this presentation and on the Investor Relations section of 02/26/2009 2

3 Hewitt Overview Hewitt Associates FY08 Net Revenues: $3.1B FY08 Operating Income (OI) / Margin: $334MM / 10.7% Benefits Outsourcing FY08 Net Revenues: $1,541MM FY08 OI / Margin: $379MM / 25% HR Business Process Outsourcing (HR BPO) FY08 Net Revenues: $541MM FY08 OI / Margin: $(90)MM / (17)% Consulting FY08 Net Revenues: $1,094MM FY08 OI / Margin: $147MM / 14% Defined Benefit (DB) Defined Contribution (DC) Health and Welfare (H&W) Additional standalone complementary point solutions Leave management Spending account administration Core process management Payroll, benefits services Workforce management Record keeping, compensation administration Talent management Employee performance Retirement & Financial Management (RFM) Talent and Organizational Consulting (TOC) Compensation, M&A, other Health Management Communications Note Net revenues, operating income and margin amounts are presented on an underlying basis (adjusted for unusual items). GAAP reconciliation can be found in the appendix of this presentation. 02/26/2009 3

4 We Employ 23,000 Associates in More Than 30 Countries Canada United States Mexico Austria Italy Belgium Netherlands Czech Republic Norway France Poland Germany Spain Hungary Sweden Ireland Switzerland United Kingdom Puerto Rico Brazil Russia Korea Japan People s Republic of China India Hong Kong Philippines Thailand Singapore Australia Argentina 26% of revenue generated outside the U.S Strong presence in fast-growing Asia Pacific markets, particularly India and China 02/26/ New Zealand

5 Our Clients Include More Than Half of the FORTUNE 500 and More Than a Third of the FORTUNE Global 500 Deleted for proprietary reasons 02/26/2009 5

6 Overall HR Consulting and Outsourcing Landscape Depth, Breadth of Offering Key Hewitt Differentiator HR Outsourcing HR Consulting Benefits H&W DC DB HR BPO Health Retirement Talent Hewitt HR BPO Providers Accenture ACS Convergys IBM Benefits Providers ADP ING / CitiStreet HP / ExcellerateHRO Fidelity JPMorgan Chase Consultants Mercer Towers Perrin Watson Wyatt Market player Primary competitor 02/26/2009 6

7 Four Key Pillars Support Our Strategic Vision Hewitt Vision Keep Clients First Grow With Intention Get Lean Create a Rewarding Work Experience 02/26/2009 7

8 Historical Consolidated Revenue, Operating Income and Margin Net Net Revenue Revenue ($B) ($B) $2.2 $2.8 $2.8 $2.9 $3.1 Operating Operating Income Income ($MM) ($MM) and and Margin Margin $400 $350 $300 $250 11% $240 9% $252 8% $216 9% $257 11% $334 12% 10% 8% $200 6% $150 4% $100 $50 2% $0 0% FY04 FY05 FY06 FY07 FY08 FY04 FY05 FY06 FY07 FY08 Note Net revenue, operating income and margin amounts are presented on an underlying basis (adjusted for unusual items). GAAP reconciliation can be found in the appendix of this presentation. 02/26/2009 8

9 Recent Results (FY08 and FY09 Q1) Figures in $million, except EPS FY2008 Change vs. prior year FY2009 Q1 Change vs. prior year Net revenue 1 $3,151 +8% $771 (3)% Operating income 2 $ % $ % Diluted EPS 2 $ % $ % Free cash flow $210 (39)% $29 +$39MM Adjusted EBITDA 2 $ % $152 (1)% 1-Adjusting for currency, acquisitions/divestitures, third-party revenues and unusual items, FY08 net revenue grew 7%; FY09 Q1 grew 3% 2-Underlying basis; GAAP reconciliations can be found in the appendix to this presentation. 02/26/2009 9

10 Balance Sheet Balance Sheet 1 Recently completed $500MM financing on attractive terms $431MM cash and cash equivalents $641MM long-term debt Credit 1 $229MM undrawn credit facility balance No significant debt maturities until x long-term debt / EBITDA 2 1.5x current ratio Flexibility to pursue growth agenda and continue to improve capital structure $300MM share repurchase authorization (1) At 12/31/2008; (2) trailing 12 month EBITDA 02/26/

11 Key Business Initiatives Benefits Outsourcing HR BPO Consulting Drive sales in our core large-client market Further middle-market and point solutions penetration Development of new complementary point solutions Investments in quality and productivity Improve cost structure, productivity Selectively pursue new deals with core set of services High quality, consistent service delivery Proactive focus on client needs given volatile economic conditions Utilization and productivity improvement Investments in Targeted practices International expansion 02/26/

12 Investment Summary Differentiated market position unique combination of HR thought leadership and outsourcing operating scale Blue chip client base with high degree of recurring revenue Conservative balance sheet, healthy cash flow provide significant financial flexibility Positive earnings momentum 02/26/

13 February 26, 2009 Hewitt Associates, Inc Robert W. Baird Business Solutions Conference

14 GAAP Reconciliation Consolidated Historical Results Historical Consolidated Operating Income and Margin GAAP Reconciliation In $ millions Fiscal Year Reported net revenue $ 2,200 $ 2,832 $ 2,789 $ 2,921 $ 3,151 Adjustment for HR BPO contract restructuring (23) Cyborg operations (21) - Underlying net revenue 2,200 2,832 2,789 2,900 3,128 Reported operating (loss) income (64) (143) 313 Adjustments Amortization of one-time IPO-related grant of restricted stock to employees Goodwill and asset impairments / loss provisions Severance Real estate HR BPO contract restructuring Litigation settlement Cyborg -- FY08 gain (1) / FY07 operations (2) (9) (35) Total adjustments Underlying operating income $ 240 $ 252 $ 216 $ 257 $ 334 Underlying operating margin 10.9% 8.9% 7.7% 8.9% 10.7% Note: On January 31, 2008, the Company closed on the sale of assets related to its Cyborg business, a licensed payroll and software services organization acquired in February through September 2007 Cyborg results have been excluded from underlying and as adjusted amounts for year-over-year comparative purposes (FY08 vs. FY07). 02/26/

15 GAAP Reconciliation FY2008 Segment Results Benefits Outsourcing In $ millions FY08 HR BPO In $ millions FY08 Consulting In $ millions FY08 Net revenue $ 1,550.1 Adjustment for HR BPO contract restructuring (9.0) Underlying net revenue 1,541.1 Segment income Adjustments HR BPO contract restructuring (4.3) Real estate 17.9 Total adjustments 13.6 Underlying segment income $ Reported segment margin 23.6% Underlying segment margin 24.6% Net revenue $ Adjustment for HR BPO contract restructuring (14.1) Underlying net revenue Segment income (loss) (83.3) Adjustments Cyborg divestiture (35.4) HR BPO contract restructuring 16.1 Real estate 13.1 Total adjustments (6.2) Underlying segment income (loss) $ (89.5) Reported segment margin -15.0% Underlying segment margin -16.5% Net revenue $ 1,094.3 Segment income Adjustment for Real Estate 4.2 Underlying segment income $ Reported segment margin 13.1% Underlying segment margin 13.5% 02/26/

16 GAAP Reconciliation FY2008 Results 02/26/

17 GAAP Reconciliation FY2008 Results 02/26/

18 GAAP Reconciliation FY2009 Q1 Results 02/26/

19 GAAP Reconciliation FY2009 Q1 Results 02/26/

20 GAAP Reconciliation FY09 Q1 Credit Ratios Long Term Debt / Trailing Twelve Month EBITDA In $ millions FY2008 FY2008 Q1 FY2009 Q1 FY2009 Q1 TTM Reported net income $ 188 $ 64 $ 65 $ 189 Depreciation and amortization Provision for income taxes Interest expense (income), net 3 (5) 6 14 EBITDA $ 494 $ 150 $ 153 $ 498 Debt and capital lease obligations, less current portion $ 641 Long term debt / EBITDA (x) 1.3 Current Ratio Current assets $ 1,447 Current liabilities $ 973 Current ratio (x) /26/