Willis Towers Watson PLC Q2 FY2024 Earnings Call

Good morning. Welcome to the WTW Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. Please refer to the wtwco.com for the press release and supplemental information that were issued earlier today. Today's call will be available for the next three months on WTW's website. Some of the comments in today's call may constitute forward-looking statements within the meaning of the Private Securities Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties. Actual results may differ materially from those discussed today, and the company undertakes no obligation to update these statements unless required by law. For a more detailed discussion of these and other risk factors, investors should review the forward-looking statement section of the earnings press release issued this morning, as well as other disclosures in the company's most recent Form 10-K and in other filings the company has made with the SEC. During the call, certain non-GAAP financial measures will be discussed. For reconciliations of the non-GAAP measures as well as other information regarding these measures, please refer to the earnings press release issued this morning and other materials in the Investor Relations section of the company's website. I will now turn the call over to Carl Hess, WTW's Chief Executive Officer. Please go ahead.

Good morning, everyone. Thank you for joining us for WTW's second quarter 2024 earnings call. Joining me today is Andrew Krasner, our Chief Financial Officer. We delivered a strong second quarter, headlined by 240 basis points of year-over-year adjusted operating margin expansion, adjusted diluted earnings per share of $2.55, a 24% increase over the prior year, and $361 million of free cash flow. These healthy bottom-line results were the product of our continued robust organic growth, growing operating leverage across our businesses, and the ongoing success of our transformation program. We are very pleased with our sustained momentum from the success of our strategic initiatives, alongside continuing favorable market conditions. Our 6% organic revenue growth in the quarter represents the value proposition of our business, the impact of our investments in talent and technology, and the markets we have prioritized. Based on our strong first half performance and our continued confidence in our outlook and execution, we have raised the low end of our 2024 adjusted operating margin and adjusted EPS target ranges to 23.0% to 23.5%, and $16 to $17 of EPS, respectively. In addition, thanks to the success and momentum of our Transformation program, we've been able to identify additional savings and accordingly are raising our cumulative run rate transformation savings target from $425 million to $450 million by the end of 2024. We continue to expect mid-single-digit organic growth to achieve revenue of $9.9 billion plus. I'm pleased with our colleagues' focus and dedication in executing our strategic priorities. Our results and outlook reflect their hard work in delivering for our clients and driving improved productivity and efficiency. With that in mind, let me share some specifics on our recent progress and the opportunities ahead of us. As I mentioned, our rising productivity drove greater operating leverage this quarter, significantly bolstering our bottom-line performance. Our transformation effort also contributes substantially to margin expansion. We achieved $24 million of incremental annualized savings this quarter, bringing the total to $394 million in cumulative annualized savings since the program's inception. As we near the end of our three-year transformation program, we're confident that the program has positioned us for further margin expansion over the long term. We now have the organization, processes, and capabilities in place to further optimize our cost structure, increase operational effectiveness, and improve profitability on an ongoing basis. In HWC, we continue to harness the strength of our portfolio to drive growth. We captured demand and added new clients in each of our core businesses made many smart connections to better serve our clients' needs across different areas and introduced new breakthrough solutions. That combination enabled us to achieve 5% organic revenue growth in the quarter, delivering accelerated growth across the health, wealth, and career businesses as we consciously managed BD&O growth to optimize earnings and cash flow. Growth was led by our health business, which generated 9% organic growth. Across the segment, we continue to see good levels of demand driven by healthcare inflation, strong employment, elevated pension fund status, new legislative and regulatory requirements, and other complexities in the macro environment. Our deep expertise and rich experience combined with our data analytics and software solutions position us well to help clients navigate the dynamic environment, from managing total awards costs to de-risking pension plans. Our teams have successfully generated notable upticks in a number of areas. We've added several new global benefits management appointments with organizations that want to better manage costs and also improve their employees' experience. With a favorable interest rate environment, we've helped more clients initiate pension de-risking processes through bulk sums in the U.S. and new buy-ins and buy-outs in Great Britain. As we've helped guide clients on the implications of new pay transparency and equity requirements to the EU, more companies have engaged us for broad-based reward projects. In response to the strong employment market, we sold more compensation benchmarking surveys and more licenses for Embark, our employee experience portal. And our LifeSight Master Trust in Great Britain continues to grow, having just exceeded 20 billion sterling in assets under management. Our focus on smart connections across HWC has also continued to pay dividends. This past quarter, we worked with a large airline, which was already a global benefits management client of our health business. This client sponsored a large number of pension plans in multiple countries and needed help keeping these plans compliant, competitive, and well-run. Our GBM team introduced the client to our retirement team, which was able to provide a complete solution tailored to their retirement needs. Our strong existing relationship, together with our smart connections mindset, helped us win a multi-year contract and gave our client a more developed service proposition with flexible pricing options. Another example involves a large automotive retailer, where we secured a health and benefits consulting and brokerage relationship. To improve how their employees valued and utilized their benefits, we introduced our employee experience team, who presented a personalized digital approach to communication that helped the plan members break through the complexity of the healthcare environment. This generated an interest in learning how we could help them simplify the administration of their benefit plans. And after hearing how our teams could also collaborate to deliver insights to improve the plan's effectiveness and help them reduce overall healthcare costs, they appointed us as their benefits outsourcer. In a third example, our segments collaborated when a team in CRB reached out to our health and benefits and retirement experts. Our CRB team who'd been helping a client assess and manage integration risks in a newly acquired business recognized that the client's needs went beyond property casualty risks to also include people risks requiring employee benefits expertise across multiple countries. We secured this win by offering complete M&A guidance, including strategic planning and brokerage services covering both corporate risk and employee benefits. We've previously highlighted how HWC has developed breakthrough solutions that are leading the market and I'm delighted to share two more breakthroughs this quarter. First, knowing how highly employees value flexibility, members of our U.S. retirement team helped one of our clients find a way through complex regulations and potentially challenging administrative requirements to introduce a new pension plan feature to help employees better manage their financial situation. Also, our investments team launched our first ever dedicated private equity pool fund. The fund's innovative and liquid structure will be open to wealth and defined contributions for clients. In risk and broking, our focus on specialization, investments in talent and technology, and top quality client service continues to sustain client retention rates in the mid-90s and generate substantial growth opportunities. This is evidenced by the segment's organic revenue growth of 10% for the quarter, fueled by our specialty businesses, which continue to outpace the growth of the rest of the segment. All of this is the product of our differentiated service offerings and ability to adapt to our client's changing and complex risks. Our R&D specialization strategy is about delivering tailored solutions that address industry-specific risks and optimizing our client outcome. One of our client wins this quarter included the insurance placement for an energy supplier who had a challenging loss record and complex risk profile and was under severe time constraints for securing an insurance solution. Thanks to our deep expertise in the natural resources sector across multiple geographies, we were able to provide the company with complete coverage in just one month. We continue to make good progress with Verita, our open market MGU in North America. Submission volume continues to increase each month as the brand is expanded across the U.S. with broad opportunities from different brokers. The team continues to evaluate and add new products to the platform to further accelerate revenue growth in the second half of the year and beyond. As we've mentioned, investments in our R&D talent base have also been a significant revenue growth driver for the segment. After a focused effort to replenish our talent base over the past few years, these new hires have become increasingly productive and are contributing to our strong organic growth in the segment. Our recent hiring efforts have been more opportunistic and strategic with the goal of enhancing our ability to achieve sustainable, profitable growth and create value. Lucy Clark, who's recently joined us, is one example of this type of strategic hire. Lucy's commitment to specialization, data and analytics, and exceptional client service makes her a perfect fit to lead risk and broking. We expect that our market presence, proven track record, and focus on talent will help further drive organic growth and margin expansion in the segment, building on the excellent work Adam Gerard has accomplished over the last five years. We are confident that our strategic investments in talent and technology, along with our specialization strategy, are leading to increased engagement with both new and existing clients. This heightened activity is crucial for driving our organic revenue growth and expanding margins for the rest of the year and beyond. In conclusion, I'd like to thank our colleagues for their unwavering commitment to WTW and to our clients, which helped us to achieve another solid quarter. We continue to effectively execute on our strategic priorities, setting us up to achieve our objectives for the year. I'm enthusiastic about our opportunities in the second half of the year and have confidence that we are on the right path to achieving our goals for 2024. And with that, I'll turn the call over to Andrew.

Thanks, Carl. Good morning, and thanks for joining us today. In the second quarter, we delivered organic revenue growth of 6% and drove adjusted operating margin expansion of 240 basis points, resulting in adjusted diluted earnings per share of $2.55, an increase of 24% over the prior year. As Carl mentioned, thanks to our solid results for the past two quarters and our confidence in what we expect to achieve in the second half of the year, we have raised the low end of our 2024 financial targets for adjusted operating margin and adjusted EPS, bringing the target ranges to 23% to 23.5% and $16 to $17, respectively. In addition, we have been able to identify additional transformation savings and are raising our cumulative run rate target from $425 million to $450 million by the end of 2024. The total cost to achieve these savings is now estimated at $1.175 billion. These additions to the transformation program will help us drive further efficiencies as we remain focused on a strong finish to the program. Next, I'll spend some time reviewing our segment results. Note that to provide comparability with prior periods, all commentary regarding the results of our segments will be on an organic basis unless specifically stated otherwise. Health, wealth, and career generated revenue growth of 5% compared to the second quarter of last year, in line with our expectations of mid-single-digit organic revenue growth for the segment for 2024. We noted last quarter that we expected health revenue growth to accelerate, and indeed the business generated revenue growth of 9% for the quarter in comparison to 3% growth in Q1. North America generated strong growth as a result of increased project work. In addition, international and Europe delivered double-digit growth driven by strong client retention, new local appointments, and the continued expansion of our global benefits management client portfolio. Wealth grew 5% in the second quarter, driven by strong growth in our retirement business due to new client acquisitions and increased project work, including pension de-risking work in North America and additional work required in a peak valuation year in Great Britain. We also delivered solid growth in our investments business due to improvements in capital markets and growth from our LifeSight solution. Career delivered 4% revenue growth in the quarter, primarily driven by broad-based compensation assignments in work and rewards in North America and Europe, as well as projects related to communication work and employee experience. We also saw growth in our product revenue with more sales of Embark, our employee experience portal. Our compensation benchmarking participation continues to be elevated over 2023, which should lead to accelerated growth in the second half of 2024. Benefits delivery and outsourcing was flat for the quarter. Solid growth and outsourcing from increased project work more than covered the revenue headwind related to the client we mentioned last quarter who insourced its health and other benefits administration. This growth was offset by a decrease in our Medicare-related business, where we deliberately moderated growth to reflect market developments, maximize profitability, and improve free cash flow outcomes. Said differently, we do not simply chase growth at any cost in this business. HWC's operating margin was 21.9%, an increase of 360 basis points compared to the prior year second quarter, primarily driven by operating leverage and transformation savings. Moving to risk and broking, revenue was up 10% on an organic basis for the second quarter, with no meaningful impact from book of business activity. Interest income was $29 million for the quarter, up $14 million from the second quarter last year. Corporate risk and broking had another exceptionally strong quarter with organic growth of 11%, primarily driven by higher levels of new business, strong client retention, and renewal increases across all geographies. Our specialty lines continue to be major contributors to the strong growth performance, led globally by our facultative, construction, crisis management, and financial solutions teams. Growth across CRB in Europe was led by financial solutions, facultative, Fenix, and crisis management. North America CRB had solid growth, driven by new business and higher renewal business from crisis management, natural resources, construction, real estate, hospitality and leisure, as well as healthcare and life sciences. Our international region had double-digit organic growth across all sub-regions, led by countries in Central and Eastern Europe, the Middle East, and Africa, and Latin America. In terms of rates, we see a continued improving landscape with favorable outcomes for clients. We see a stabilizing and softening market in some of our largest lines of business, such as property, caused by the increasing supply of capacity from insurers. The market for financial lines continues to soften, albeit with slower rate reductions in the past quarter. An exception to that is cyber where the market is softening faster. Across those specialty lines, we see a mix, for example, in political risks and trade credit, the market is stable with some small premium rises. The same in casualty where the market remains challenged for primary risks, especially those with North America exposures. Insurance Consulting and Technology revenue was flat compared to prior year due to tempered demand mainly in the consulting business in North America and the UK. However, we have taken corresponding expense actions to protect our margins. We expect ICT to achieve mid-single-digit growth for the full year. RMB's operating margin was 20.6% for the quarter, a 450 basis point increase over the prior year second quarter primarily due to operating leverage driven by solid organic revenue growth in CRB, disciplined expense management, interest income, and transformation savings. Now let's turn to the enterprise level results. At the enterprise level, adjusted operating margin for the quarter was 17%, a 240 basis point increase over the prior year, primarily driven by greater operating leverage and the benefits of our transformation program. We had $24 million of incremental annualized transformation savings, bringing the total to $394 million of cumulative savings since the program's inception. The program continues to better position us to drive operating leverage going forward. Our unallocated net was negative $106 million for the second quarter and reflects the inclusion of a $13 million provision for significant litigation. We continue to expect the full year 2024 balance to be relatively consistent with 2023. Foreign exchange was a headwind to adjusted EPS of $0.03 for the quarter. At current spot rates, we expect foreign exchange to be a headwind of approximately $0.10 on adjusted EPS for the year. Our U.S. GAAP tax rate for the quarter was 15.6% versus 19.8% in the prior year. Our adjusted tax rate for the quarter was 22.6% compared to 23.7% for the second quarter of 2023. We continue to expect our adjusted tax rate for the year to be close to our 2023 rate, excluding the one-time items we mentioned at year-end. During the quarter, we returned $290 million to our shareholders via share repurchases of $200 million and dividends of $90 million. We continue to view share repurchases as an attractive use of capital to create long-term shareholder value and be the central focus of balanced capital allocation. We continue to expect share repurchases to total approximately $750 million in 2024, subject to market conditions and other relevant factors. We generated free cash flow of $361 million for the six months ended June 30, an increase of $11 million from the prior year, primarily driven by operating margin expansion, partially offset by cash outflows related to transformation and discretionary compensation payments. The free cash flow results for the quarter are in line with our expectation as free cash flow margin was not intended to be linear for the year. We continue to be confident in our expectations of year-over-year improvement in our full year free cash flow margin. Our strong topline and bottom line performance this quarter reflects our ongoing momentum and the exemplary efforts of our colleagues to drive greater productivity and efficiency. We expect this to continue into the second half of the year and are confident in achieving our 2024 targets. With that, let's open it up for Q&A.

Thanks. Good morning. My first question, just as we think about the updated '24 guidance, what do you guys think is the biggest swing factor on just being able to exceed the EPS guidance you've outlined for '24.

Good morning, Elyse. I guess I'd look at it this way. We're really pleased with our execution in the first half of this year. And we remain optimistic on where we're tracking within the updated guidance. We do see some opportunities for stronger performance relative to our margin guidance. For example, better-than-expected productivity from our investment in talent. The timing of transformation savings could have an effect. We are continuing to find opportunities to trim expenses without impacting growth and productivity. And then, I guess, fourth, maybe I'd identify the potential for rebounding global M&A activity. That creates opportunities for both of our segments. So all these are factors that could potentially lead to some outperformance.

Thanks, and then my second question is on free cash flow. Carl, you mentioned consciously managing BDO growth, right, to optimize free cash flow. When I look at the cash flow for the quarter, and I kind of adjust for transformation spend, which should be winding down, the conversion was at 21% of revenue, a little bit lower for the first half of the year, given that cash usage are higher in Q1. But it seems like you guys are on your way to being above that 16% target. Am I correct in that assessment? And when we get through transformation spend, is kind of the free cash flow conversion is expected to perhaps be greater than what you've outlined to the Street?

Yes. Elyse, it's Andrew. The free cash flow margin target of 16% plus was a longer-term target, not something necessarily tied to 2024. We're really pleased with the progress that we continue to make there. And again, the levers there that will get us to that 16% plus over time are the expansion of the operating margin, which we've demonstrated quite well this quarter, and we'll continue to do that, not just through transformation and operating leverage, but also by developing businesses in more profitable markets. The second item is going to be the abatement of the transformation-related cash outlays, which you mentioned, which we would expect through the beginning of 2025. And then, of course, the improved cash conversion in our TRANZACT business, which we're managing the growth profile there to maximize profitability and cash conversion. So we think all of those things taken together put us on a really solid path to get into that 16% plus over time.

Good morning, everyone. So for the first question, I'm going to focus on organic revenue growth. And in both your comments, you called out some, I'd call it, good items that helped boost organic revenue growth in the second quarter, project for capital markets, bulk lump sum. So I guess my question on organic is how much of the result from the second quarter and through the first half is sustainable versus onetime in nature? Or put it another way, just trying to figure out what type of recurring aspect of the organic results will continue through next year and beyond.

Good morning, Greg, it's Carl. So let me start with HWC, right? As I mentioned in the prepared remarks, we expect tailwinds that will help sustain us regarding helping clients navigate the current economic environment. That includes work surrounding pension de-risking and managing total awards, as you cited. We see the increased compensation benchmarking participation that we're getting, and that continues to be elevated over the prior year. That creates a pipeline for accelerated growth in the latter half of this year. And our smart connection strategy continues to lead to increased cross-selling opportunities. I highlighted a few of those in the prepared remarks. Moving over to R&B, we're really pleased with the 10% organic growth we delivered in R&B for the quarter, and we continue to expect mid-single-digit or better growth for that segment for the full year. We're seeing increased contributions from our strategic investments in talent and platforms, and as we continue to pursue opportunities in line with our specialty strategy. So we're confident we can achieve our 2024 revenue goals with the growing momentum we have with our clients as well as our expected pipeline for the rest of the year. Our client retention rates are strong our book gain activity has normalized down to very manageable levels. And so we're pleased with the organic growth results from this past quarter. They are directly in line with our expectations that we laid out at year-end, right, with mid-single-digit growth at the enterprise level and in HWC and mid-single-digit and better growth in R&B. While some businesses are seeing lower growth, others are seeing higher than planned growth, and overall, we're comfortable regarding our revenue expectations. Look, we've had a lot of positive momentum in our business, largely due to the investments we've made in talent and technology as well as our growth initiatives focused on specialization and smart connections. The strategic investments we've made across the business position us, we think very well to pursue opportunities globally that offer the greatest potential for profitable growth and as these investments take shape, we expect greater top-line contributions.

Hey thanks. So yeah, I just wanted to ask about transformation cash spend. So it looks like with the updated guide, if I've got my numbers right, that there's a little more than $160 million in cash restructuring charges left under the program. Do you expect the majority of those cash payments to occur in the back half of 2024? And just given that there was over $250 million of cash spending in the back half of 2023, I just want to confirm that from this point forward, cash restructuring spend is likely to be a year-over-year tailwind to free cash flow?

I would turn that around. We should also keep in mind that some of that will extend into 2025 regarding the timing of when the cash is spent compared to when the expenses are incurred from the transformation program.

Good morning. Thank you for the call. I would like to hear your thoughts on the current issues, particularly regarding the outlook for the Property and Casualty market and the challenges we are facing in casualty. It appears that pricing is moderating in property, while it seems relatively stagnant in casualty. From your perspective, what do you think is happening, and what changes do you anticipate?

Sure. Good morning. Overall, we're noticing a stabilizing to softening market with some variations. In the property sector, the global trend is stabilizing to softening, although the first half of the year saw significant natural catastrophe losses from events like storms in the U.S., flooding in Europe, and an earthquake in Taiwan. The capacity for natural catastrophes is no longer the primary factor driving premium increases here. Conversely, in the casualty market, we are experiencing decreased capacity and rising prices. Financial lines are continuing to soften, but the rate reductions have slowed this quarter. The cyber market is softening more quickly as insurers expand their appetite and new capacity enters. The marine sector appears stable to softening. Geographically, there is a softening market in Asia, Australia, and Latin America, while Europe is generally flat, the same for the UK, and premium increases in North America have stabilized. Current rate increases are largely influenced by complex risks such as social inflation, geopolitical conflicts, and natural disasters, affecting our casualty lines, particularly in North America as well as globally regarding political violence and terrorism. In terms of our results, we do not consider rate changes to be a significant factor impacting our R&B portfolio this past quarter. Our growth has primarily stemmed from high retention rates, new business, and the investments made over recent years to specialize within our R&B business. We believe this focus has positively impacted us and will continue to set us apart.

Good morning. I want to follow up on a previous question regarding organic revenue growth. You achieved 9% in health and 10% in CRB. Considering the outstanding talent you've brought on board, those numbers reflect their contributions. When I compare the low double-digit and high single-digit growth in health and CRB to your guidance of mid-single-digit growth or higher, should I interpret most of that extraordinary growth as primarily benefiting from the new talent, with a gradual shift towards mid-single digits or higher? Or do you expect those strong numbers in those two key sub-segments to persist?

Well, I mean, as I've said before, Andrew, right, we do have some positive momentum that results not just from the investments we've made in talent, but what we think is a differentiated strategy that enables that talent to best succeed in the marketplace. We do think that we still have more productivity we can get from the cohorts of talent we've brought on board over the last several years. And we continue to look for talent out in the marketplace who view WTW as the best place they can use to leverage what they can bring to their client base. So we think that there's momentum in those businesses. We think our strategy helps us succeed, and we are optimistic that there is continued progress we can make.

Yes, sure. ICT comprises about 10% or roughly $400 million of R&B's annualized revenue, and that's split roughly 50-50 between software sales and consulting revenue. Given its size, a few million dollars in either direction can have an impact on the organic growth rate for the period of a couple of sizable contracts have modified timing period-to-period. In the first half of the year, we saw some of those large consulting projects being postponed. However, we recognize that the environment for certain advisory work within ICT, they continue to be challenging. So we've moderated our growth expectation there accordingly along the lines of mid-single-digit growth for ICT. So it's really around the timing of some software sales, which can be chunky from time to time as well as some of the discretionary spend related to the consulting side of the business and the timing of those projects.

Thanks, good morning. Carl, you mentioned the opportunity to potentially outperform some of the margin guidance. I was wondering if you could quantify any potential upside to margins.

Yes, we won't specify any potential upside, but as I reflect on how the remainder of the year might unfold, we're very satisfied with the 240 basis points of margin expansion we achieved this quarter. This gives us confidence in our full-year outlook, which is why we have raised our target range to 23% to 23.5% for the year. When considering the factors for the rest of the year, we expect the transformation savings to be distributed evenly throughout the year. We also foresee operating leverage on an annual basis as we continue to foster organic growth while prioritizing cost discipline and operational efficiency. Additionally, keep in mind that the timing of book gains and interest income during the comparable period may lead to fluctuations in margin expansion from quarter to quarter. However, as I mentioned and as Carl noted earlier, we do see chances to exceed expectations.

Good morning. Returning to the topic of our strong organic growth in R&B, I noticed in your comments this quarter that client retention is in the mid-90s. In past quarters, you mentioned that retention has improved. Can we assume that retention continues to contribute to some of the significant growth, or am I overinterpreting this?

I mean, retention continues to be in the mid-90s, which is a level we're very pleased with, that business you keep is less business you have to replace. We think that's a result of the excellent client service we deliver as well as the insights we're able to provide our client base with our risk analytics that we feel are unmatched in the industry. So no question that the retention rates we have are ones we'd like to keep more persistent going forward.

Great. And then, Carl we take a look at all the various segments. And with the exception of TRANZACT, which you're moderating on purpose, it seems like the momentum is quite solid. Obviously, you've got a differentiated strategy. You've made some talent hires. But I'm also wondering, when you internally monitor engagement within the more than 40,000 professionals that you have within the organization, after several years of change, do you feel like morale engagement has improved significantly? And some of the productivity improvements that we're seeing are basically just due to a widespread increase in terms of confidence and things being more settled?

I don't want to give any impression that we're sitting there and thinking we solved everything, that we are arrogant. But I do think organizationally, we're dealing with 46,000 people who got their mojo back, and it shows. And when I walk the halls of an office, whether it's here today in New York or London or Paris or Hong Kong, people like where they're working and they're enthusiastic about our prospects. And that's a wonderful thing to say.

Thank you. Good morning. I wanted to circle back to the guidance, the updated guidance, specifically the margin guidance. So I think at the midpoint, the new guidance would suggest material slowdown in margin expansion in the second half. Can you maybe talk about that a little bit?

Yes, I think I would refer back to Carl's earlier comments about continuing to drive operating leverage and the success of our transformation program. We have a good sense of where we might end up within that range and are optimistic about it. We're quite confident in our position, considering the industry dynamics and our progress on transformation and operating leverage. Again, we are encouraged by our outlook.

Hi good morning. I had a question just on the head count growth within R&B. It sounds like the productivity enhancement has been exceeded expectations, but I'm wondering as we sort of sunset that or that moderates as employees ramp how you guys are thinking about head count growth within R&B compared to the 2% head count growth in R&B you had in 2023?

So I mean, after a focused effort over the past few years, we think we've replenished our talent base. We've seen the new hires begin to contribute to our organic growth, as I discussed earlier. We've had several waves of hiring over the past few years, and so we still have a bit more to go as these cohorts mature to peak productivity. Currently, our hiring efforts are more opportunistic. They were strategic with a goal of enhancing our ability to achieve sustainable and profitable growth and create value. Our hiring of Lucy Clarke that I talked about during prepared remarks is one example of this sort of strategic hire. We've recently announced a few other strategic hires to support our industry verticals and Verita as well. With respect to our expense rate base, any incremental investments, whether they're in talent or technology are not going to prevent us hitting our 2024 margin targets, and as Andrew has alluded to, we expect to be toward the higher end of our target margin range in 2024 and expect margin expansion in both segments.

Yes. We're very pleased with the growth that we've seen since launching the platform. It's done better than we had initially expected. However, given the overall size of the R&B business, still relatively small and not necessarily moving the needle from an organic growth perspective at this point in time.

Thank you. Good morning. Andrew, anything you can say about the trajectory of unallocated into 2025?