Willis Towers Watson Public Limited Company (WTW) Q2 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Second Quarter 2014 Towers Watson Earnings Conference Call. My name is Shantelle, and I will be your facilitator for today's call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Aida Sukys, Director of Investor Relations. Please proceed, ma'am.

Thanks, Shantelle, and good morning, everyone. Welcome to the Towers Watson Earnings Call. I'm here today with Roger Millay, Towers Watson's Chief Financial Officer. John Haley, Towers Watson's Chief Executive Officer, will not be attending the call today due to a personal matter. Please refer to our website for this morning's press release. Today's call is being recorded and will be available for replay via telephone for the next week by dialing (617) 801-6888, confirmation number 98259601. The replay will also be available for the next 3 months on our website. This call may include forward-looking statements within the meaning of Section 21 of the Securities Exchange Act of 1934 that involve risks and uncertainties. For a discussion of forward-looking statements and the risks and other factors that may cause actual results or events to differ materially from those contemplated by forward-looking results, investors should review the Forward-looking Statements section of the earnings press release issued this morning, a copy of which is available on our website at www.towerswatson.com, as well as other disclosures under the heading of Risk Factors and Forward-looking Statements in our most recent Form 10-K and our other filings with the SEC. Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this earnings call. During the call, we may discuss certain non-GAAP financial measures, such as adjusted EBITDA, adjusted net income and adjusted earnings per share. For a discussion of these non-GAAP financial measures, as well as a reconciliation of these non-GAAP financial measures under Regulation G to the most closely comparable GAAP measures, investors should review the press release and the accompanying financial tables we posted on our website this morning. After our prepared remarks, we will open the conference call for your questions. Now I'll turn the call over to Roger Millay.

Good morning, and thanks for joining us. As Aida said, John sends his regrets, and he's sorry he was unable to join the call. Today, we'll review our results for the second quarter of fiscal 2014 and our guidance for the remainder of the fiscal year. These results -- the prior year results and fiscal '14 guidance reflect the divestiture of our Brokerage business. The Brokerage business has been reported as discontinued operations in our current financial statements. The sale was finalized on November 6. We recently announced the expansion of our Exchange Solutions segment, which will combine all of our OneExchange resources as well as the health and welfare administration work under one segment. The leadership appointment was effective February 1 and did not impact the second quarter segment reporting we'll be discussing today. We'll begin to reflect the segment reporting realignment when the specific organization movements are finalized, which we expect to occur as of April 1. Reported revenues for the quarter were $888 million, a decrease of 2.5% over the prior year's second quarter reported revenues and down 2% on an organic basis. On a constant currency basis, revenues decreased 2%. Our organic growth rate adjusts for changes in foreign currency exchange rates, acquisitions and divestitures. Our adjusted EBITDA for the quarter was $172 million or 19.4% of revenues. The prior year second quarter adjusted EBITDA was $176 million or 19.3% of revenues. For the quarter, diluted earnings per share were $1.21, up 9%, and adjusted diluted earnings per share were $1.40. Although revenues were a little softer than expected, we continue to believe the underlying business and long-term prospects are strong. I'll provide a more detailed discussion of the revenue drivers in each of the segment overviews. We continued to make significant progress this quarter against…

[Operator Instructions] And the first question comes from the line of Tobey Sommer.

Roger, did the enrollment of Retirees of, I think, 145,000 that you mentioned, if I got that right, did that meet your expectation?

I think you're remembering last year's number of 145,000. So what we said is 560,000 for total or in excess of 560,000. So what that communicates is that we were in excess of 160,000 for enrollments for this year.

Okay. And did that number meet your expectation?

Yes, it did. Yes. Yes, what we had said, if you recall, Tobey, I think a couple of quarters ago, that we expected to exceed the 145,000 of last year, which clearly we did. So...

Right. And I was curious, what sort of an impact you think the off-cycle enrollments, as well as your web broker position for the federal exchange, can contribute during calendar '14?

Well, maybe just step back a little bit on that question, one of the things you've heard us talk about really since we acquired Extend Health was that we had hoped for a more even process through the year, and the team's really been working hard to develop the pipeline of off-cycle enrollments. And last year, it was a positive for us, and that momentum continues into this year. We don't have a specific forecast for you on levels of off-cycle enrollments, but the momentum is positive. It's still, of course -- year-end enrollments is the big material emphasis. With respect to the web broker...

Could I -- Tobey, this is Aida. I could probably take that one. I think that we're just going through the first really large Access enrollment process right now to the public exchanges, and so, again, I think that it's a little early to say what the overall impact is going to be. But we feel positive about what's happening now, but it's a little too early to tell about what's going to happen with the -- it won't have a huge impact or we don't anticipate having a significant impact on fiscal year '14 revenues.

Did we have a number out there for the April 1 or?

Yes, there's approximately 30,000 employees that we're helping along into the public exchanges, but that's also fee-based from the client. And then we'd be getting any commissions on top of that. But we don't have a good trend -- historical trend yet to understand how many of the commissions we'll get from those 30,000.

That's helpful, Aida. Yes, my last question, and I'll get back in the queue, is what are clients telling you about what I think you described as maybe some project pushouts from the December quarter and the potential for de-risking work to resume in calendar 2014?

Yes, an important question for retirement. So as we mentioned in the script, we did anticipate a little bit stronger project activity as calendar 2013 closed. But the outlook for calendar '14, given the change in funding positions, particularly for 12/31 companies, is positive. So we do expect enhanced activity. Again, don't have any specific numbers for you now. I think the thinking right now is that momentum is likely to build more in the second half of the calendar year than in the first half. But we think the de-risking in the bulk lump sum activity will be stronger this year.

Next question comes from the line of Sara Gubins.

I'll start off with some questions on the Exchanges. When do you think you'll know the timing about new Active sign-ups for the year? And I understand that the ramp is sort of a long-term process. Do you think it's reasonable to think that you'll be able to add more clients for the fall of 2014?

You may need to specify exactly your timing, but let me take the first shot at answering for you. The pipeline we'll build, I think as we alluded to in the comments, we ramped up our activity in the December quarter, particularly given the acquisition of Liazon and that clarity as to the platform and the market approach. So activity is strong. Interest is strong, as we said. As we've discussed for the Retiree exchange, given the predominance of fall enrollment periods, the sales season goes into the middle of the summer. We will have some sense as the next several months go by in how the pipeline is building, but I don't think we'll have anything -- real clarity for you on the sales season until late in the summer. And that's all kind of related to the 1/1/15 enrollment period, which I think is what you were focused on.

Okay. And overall, could you talk about the capacity that you now have in Exchanges on the private side?

Yes. So maybe to take the big pieces, you didn't differentiate. Again, on the Retiree side, I think as we've been saying, as the years have gone by, as we build successfully for larger enrollment periods, our confidence about execution grows. And certainly, as we sense that the market reception -- the near-term market reception to the product grows, our view of the capacity we need to provide for expands. So we would hope to continue to be in a position for continual expanding enrollment periods. Now I don't have a number for you, hard to quantify, but we are building capacity and have capacity to exceed this year's enrollment period next year or this fall. So -- and the execution against that is all dependent on the sales cycle, obviously. So we feel really good about the leverageability of the platform and our ability to expand capacity for enrollments. On the Active side, you may recall our discussion in -- of the Liazon acquisition that we were building for enrollments in Actives of up to around 1 million participants over the next couple of years. That's really the only general number that we have out there. As has been the case with the build of Exchanges, it's a quarter -- been a quarter-by-quarter story. But the add of the Liazon platform, obviously, is very key to the building of that capacity. So we think we have the capacity for a significant enrollment period in 1/1/15, and we'll go from there.

Okay. And then just last, how should we think about discretionary compensation in the back half of fiscal '14?

Yes, I mean, as you see, I think to characterize the discretionary comp for us, we tend to circle that area of the mid-30% range as a percentage of pre-bonus net operating income. It does vary from quarter to quarter as a result of particular elements or performance. So particularly versus last year, the percentage is lower this quarter because last year we had such a strong performance in the December quarter. And I would expect at this point that, for the year, we'll still be in that mid-30% type range, so without specific numbers for each of the March and June quarters.

Your next question comes from the line of Steven Shui.

Just so I have this correct, it looks like enrollment on Liazon doubled since you guys did the acquisition. Is that right?

Well, year-over-year, yes.

Yes, year-over-year.

So they were obviously on -- that didn't just happen starting November 7. I mean, that reflects the trends of growth that they were on.

Okay, right. Can you just talk about how the conversations with Liazon's clients have been going and how retention looks so far?

Yes. I mean, it's really, I would say, no different than what we talked about at the time of the acquisition. We anticipated strong relationships. We really focused on that as part of the transition and integration. So the signs continue to look good, and we're enthusiastic and appreciative of the relationships that Liazon has built with the broker network and continue to invest in leveraging that going forward.

Your next question comes from the line of Jeff Volshteyn.

I've got a question on fees for Retiree plans, and I recall that some of the commission fees declined as the contracts go onto the next year. Is that a material level of decline? Should we be kind of modeling that in for the 2014 year?

Yes. I mean, the commissions and the fees earned in the Retiree exchange have a variety of patterns. The predominant pattern is a gradual decrease over 5 to 7 years. It is something that, from a modeling point of view, you do have to consider going out into the out-years. But that is -- the elements that offset that is there are agents onto the platform. And then when there are changes to the enrollment or the purchase, the particular policy that participants are buying, the commission pattern ramps up again. So all in all, it's something that has to be considered and is considered in the growth guidance that we give longer term.

That's helpful. And just a couple of maintenance questions. Were there any tax credits in the second quarter?

No, no. That was all in the first quarter.

Great. And what percentage of revenue comes in euro and pounds?

Let's see. It's still -- I mean, it's -- the numbers, the old numbers that -- in my head again, not having done it for this quarter, but it's about 1/3 of the revenues that are in our EMEA region. And about 20 -- maybe 2/3 of that 1/3 are in pounds, and the rest predominantly in euros. I mean, there are other, as you might imagine, miscellaneous currencies there. But most -- about 2/3 of it in pounds.

Your next question comes from the line of Tim McHugh.

Just one more Exchange question before I ask about the rest of the business. But last year, kind of I think as the year progressed, you kind of grew more and more optimistic about the opportunity in Exchange maybe as each quarter went on. As we sit here today and we kind of, I guess, look back over the last 3 months, I'm just trying to look at your comments and understand. Have you continue to grow more optimistic? Is there something -- or is there anything that's giving you a little bit more caution even about what you'll see for 2015 -- the fall enrollment period, I should say?

Well, I think in general, and I said earlier, it's been a quarter-to-quarter story. And I think the quarter-to-quarter story has been the growth in our enthusiasm, which has been reflected by the growth in our investment in the business. Certainly, and I think it is different for the Retiree exchange than the other parts of OneExchange. Again, the Retiree exchange, I think we've always believed, is a very clear value proposition that's proven in the market. And we expected increased volume, and we're seeing that, and this last period was very significant to that momentum. And as I think I said in my remarks, we expect that enthusiasm in the market and our ability to execute against it to continue growing. So that hasn't changed at all. On the Active side, of course, 1 year ago, that was a more open question, not as established. Our market approach was different than others. And again, reflecting the remarks from what is now only 3 to 6 months ago and the surveys we've done of clients, the reception that we got to the Liazon acquisition, the ensuing market activity that we engaged in late in the December quarter continues to build our enthusiasm. I mean, as again I think we said in the prepared remarks, it's still very difficult to say, okay, here's a specific number for 1/1/15, here's a specific number for 1/1/16. But the value proposition seems quite clear to us, and it seems like the market is getting it, and so we expect a lot of activity in building that business in calendar '14.

Okay. So the comment about expecting accelerating growth more so in '15 and '16 isn't any sign that you've become more uncertain about what this next year will be, and it sounds, in fact, the opposite, that you'll continue?

Well, I just specified there, it's no reflection of uncertainty in our minds about the value proposition in the product and the investments we're making. The timing is difficult. I mean, we're early in the development of a business, a change in the market. I mean, again, it wasn't that long ago, we just said we were buying Liazon. So in the last couple of months, nothing's changed. It's just -- we're just saying, look, it's difficult to predict timing.

Okay, fair enough. And then just I wanted to ask about Talent and Rewards. I know you gave a little color in your prepared remarks, but I guess, basically, it was just -- I think it was at your Analyst Day where you just kind of struck a kind of -- somewhat starkly more positive tone about kind of underlying trends. And then it seems like you saw some choppiness again this quarter pop up. So I guess can you walk through what surprised you relative to that? And I guess, it sounds like your full year guidance hasn't changed, though, for that business, so I guess if you could just revisit it in that context.

Yes, that's right. So, Tim, to your last point, we came into the year expecting mid-single-digit organic growth. We got mid-single-digit organic growth in the first half of the year, and we expect mid-single digit growth in the second half of the year. So from that point of view, the outlook versus what we expressed in Analyst Day hasn't changed. But you're right, things were a little more choppy than we expected between the first quarter and the second quarter. Again, mostly focused -- in fact, pretty much all focused in the RTC part of that business and -- which is historically more choppy because it's more project-driven, didn't get as much activity in the December quarter, but that's not a reflection of the pipeline that we see going forward or a reflection of any diminished outlook for the second half of the year. And it also is impacted by the activity in the Actives exchange, of which the Communications business, which has been a strong part of RTC for the last couple of years, that they had teams focused on the product development and the market approach there.

Okay, that's great. And then just one last question, just more broadly, it seems like still parts of your business, the European operations I guess, if I look at Talent and Rewards, and Risk and Financial Services there are still somewhat of a drag here. But I think more broadly, we're starting to hear in the market about at least a little bit improved market conditions in Europe. I guess at a high level, are you not seeing signs of that? Or are there any underlying tone -- change in tone that demand environment over in Europe starts to feel a little better for some of the more discretionary types of solutions?

Europe has been tougher for us in the last couple of quarters. As, again, I think we've pointed out in the remarks, there are puts and takes to that, but our top line numbers for EMEA are softer. I don't really have anything to report that says that as a result of the turn of the economy, that we're seeing any early signs of improvement in pipeline -- project-related pipeline there. But it's really more just kind of tactically, line of business by line of business, kind of reacting to their own particular environment. Of course, the Risk Consulting and Software part of the business, which still is very strong on the Software side, the cycle in the insurance business isn't probably going to move, be as responsive to a change in the overall European outlook. And so I don't think there's a big change, really, as a result of the change in the economy.

Your next question comes from the line of Mike Zaremski.

This is Crystal Lu in for Mike Zaremski today. My first question is just that you said you had adjusted guidance down not only because of the softness of revenues and margins in 2Q but also because of the investments in the Exchange. What's driving the increased investments? And can you quantify that impact for us? And yes, let's start with that.

Sure. Two main things, Crystal. First, again, so when we gave guidance, we hadn't closed on the Liazon acquisition, which has 2 impacts, I think. First, there is dilution related to that underlying business. They were building as well and had an operating loss that we take on just to build the business. But second, with the clarification of the Active exchange growth strategy and the platform, we have an enhanced investment plan overall for Actives exchange, and that's what's encompassed in now we're saying the $0.15 of dilution for Actives exchange. So that didn't -- none of that had taken place as of us giving guidance. Second, though, with the clarification overall of how we're going after things in the Actives market, there are business teams -- and it spans several of our lines of business, there are business teams that are now focused on, given the approach and the platform, building product specifications, market materials, market approach strategies, so there were people who just invested their time and more than we had expected, again, at the time we give guidance, for the first half sales season.

Yes, that makes sense. Okay. And then going back to the Talent and Rewards segment, following up on previous questions on that, you mentioned that RTC had 11% decline that contributed to the decline in the overall segment. Can you kind of quantify what the Executive Compensation impact was in Europe and if you expect that to continue at the same rate?

Yes. And maybe I'll start with just one other factor that occurs to me relative to the overall guidance, the EPS guidance. The other thing that impacts that is the increase in the severance estimate from $10 million to $15 million. So again, that would be several cents of EPS. I think in the Executive Comp area -- well, so you asked about the 11% decline in RTC and then, I guess, Executive Comp, and I may need you to clarify the RTC piece. But Exec Comp, the predominant driver there was the really strong comparable in Europe last year. Exec Comp does tend to be, I guess, to use the earlier term, a little choppy quarter-to-quarter. And they had a really, really strong period last year, particularly in Europe.

Yes, and I might just add the fact that, I mean, last year, they had some big special projects because of the focus on especially the financial sector of the Executive Compensation. And so there were a number of projects that have built up, and they actually produced like a 37% revenue increase last year. So we had forecasted that they would be in a decline this year.

Crystal, can I ask you, did you have more that you wanted to ask on RTC or...?

Perhaps, trying to -- I know you said a lot of the subsegments in Talent and Rewards was choppy, but is there any kind of way to help us run rate that forward?

Yes. I mean, again, I'd say -- I'll tell you the way we think about it, which is what I said earlier, in assessing momentum in some of these more project-driven businesses, sometimes you do have to step back and look at multi-quarter periods. And really, what we're saying, you take the 11% of growth for Talent and Rewards in the first quarter, and then you take the decline of 3% for this quarter, and it's -- it looks like about a mid-single-digit momentum. That's what we expected for the year, and it's what we expect for the second half of the year. And I do want to mention, in addition to the RTC and the Exec Comp factors that I discussed earlier, the momentum in Data Surveys and Technology continues to be strong. And that's been a steady grower for the first couple quarters, and will continue to support that mid-single-digit growth level in the second half of the year.

Your next question comes from the line of Mark Marcon.

With regards to one very large Retiree client that just went -- that just got enrolled, can you talk a little bit about what you learned during that process? How smooth was it? What's the feedback then? How referenceable do you think they're going to be going forward?

Well, okay, I really can't talk a lot about specifics between us and a specific client but maybe, Mark, in that context, just talk a little bit more about the last few years of momentum around executing very large enrollment transitions like that. So it was a successful enrollment period, as we said, this past period, the largest we've done. The team continues to at the operating level, develop new operational approaches and concepts, and they did -- for example, for this past enrollment period, they had a new approach to -- in the call center for how you handled calls and had a more segregated approach as far as expertise in fielding calls and then handling specifics of the enrollment. That went well, so that was a good learning. It was something that the team hadn't done before. And I think the other thing that we are seeing with experience is enhanced thinking about how to maintain a consistent employment base and expertise base through the year and dampen some of the volatility of resourcing and cost in that business. So I think, from our point of view, this was -- I think I'd say that the most successful and effective enrollment period that we've had. My sense is we get better every year. But like any growing business, it's never perfect, and you can be better next year. And the team, I mean, I'll have to say it's one thing that's really impressed me with the Extend Health team since they joined us, is that they do have a very strong continuous improvement mentality. They measure their operations very effectively and respond to what they learn. So we're successful and, I think, building for more success going forward.

That's great. And can I -- it sounds like, from your comments on the Retiree side, if anything, you would expect the enthusiasm -- the potential client enthusiasm and the pipeline there just continues to build with a greater degree of clarity. Is that correct?

Yes. And the only qualification I'd make to that is that, given that this is a business that, on the large client side and, again, would be more of a flow business, I think, in the small- to mid-market that Liazon had set up to service -- but in the large side, you're very focused on some of the larger clients. And we've said since the beginning we'd love to have a few large ones every year. But we're not naïve enough to believe that that's going to happen every year, so there may be some choppiness in the growth. But the market outlook continues to strengthen. I think the market is understanding the value proposition. Again, I think it's very clear. Particularly I say -- I would say as a CFO in generic, not necessarily Towers Watson CFO, the financial offering here and the value-add is significant. And so our sense of and confidence in building a strong pipeline for this business continues to grow.

Great. And then on the Active side, I missed the exact number, how many enrollees do we have?

That was 45,000.

For the TAS.

Yes, for Actives. So for OneExchange, Active, the self-insured approach, it was 45,000. Is that...

Yes. And that's lives or employees or plans?

That's lives. And then for Liazon, they have 82,000 -- or we have 82,000.

Yes, Mark, you may recall that this was our first year introducing the self-insured funds for the large clients. And we had mentioned the fact that we wanted to limit the enrollment just to a few clients, which we did, just to be able to prove out the technology platform and scalability. So I think we've met our expectations on that.

Great. And Liazon has 82,000. And that's compared to what, 1 year ago?

I don't have that participant number, Mark. We can get that for you at some other time, but...

But it's a significant growth, obviously.

Yes.

Okay but it's 82,000 lives, correct?

Right.

Okay, great. And then what are you hearing from Liazon's broker network?

I mean, again, I -- we talked about it a bit earlier, but we think that transition continues to be very constructive and positive. So... and we'll [indiscernible].

Is there any way to talk a little bit more about like the number of -- it sounded like one of the impacts this quarter was both within the Benefits H&W segment, as well as some of the communications people within Talent and Rewards. You had some people that were helping out as you're building out OneExchange and so, therefore, weren't billing in terms of the way they normally would. Can you -- is there any rough quantification of those types of numbers -- either people, time or way to think about it?

Yes. So maybe a couple of comments. First, as far as the health and welfare administration team that's part of TAS, certainly they're key to building the Actives exchange business, but, really, we didn't highlight that as an impact for that part of the business this past quarter. But their pipeline is strong as well, and we see that business that's coming over into Exchange Solutions as also a key growth contributor to the new Exchange Solutions segment. A number of people in the Health and Group Benefits practice, as well as in the Communications practice for Talent and Rewards, in addition, again, to the health and welfare administration team and others around the business obviously, Exchange Solutions team members, so the Retiree exchange people. And that whole group came together to focus on building for the -- both the platform, as well as -- and the product, as well as the sales pipeline. So it's hard to say exactly what the impact was, and it's why we said there are a number of factors that are both project momentum, as well as reinvestment in resources, but it's clear that it has -- it had a dampening impact in the quarter.

Okay, great. And then with regards to just the pure lump sum de-risking projects, it sounds like that pipeline should rebuild, given where your current funding levels are.

Yes, that's what we expect, Mark.

Your next question comes from the line of Ato Garrett.

Just 2 quick ones. One, looking at your 160,000 Retiree exchange enrollees, just want to confirm that does not include any off-cycle enrollees or any anticipated off-cycle enrollees?

No, that's right. It's just the -- that December quarter enrollment period, that's correct.

Okay, great. And then looking at your Talent and Rewards business, specifically to the U.S. I was wondering, can you go over some of the drivers that you're seeing there of client demand, specifically if you're seeing anything related to labor market tightness that might be driving results there?

Yes. Again, I guess the economic sensitivity questions for RTC, I mean, that -- I would say that the pipeline outlook is fine. There's not, at this point, any indication of a cyclical tightening uptick driving a lot more business there. But the outlook is fine, and we do expect growth in that part of the business in the second half, but it's not a robust expectation at this point.

Your next question comes from the line of Ashwin Shirvaikar.

So the question I have is the tough comp we all knew about or at least should have known, I guess, I want to inquire about the level of sales resources and training seems to be the second reason for the disappointment. Is there a reason why folks should be selling just OneExchange instead of core services in 95% of your revenues? I mean, if it's -- if the more focused offering that distracts from the core, you need to add resources or training or anything you can do so this doesn't repeat?

Yes, sure. I mean, look, we have to remember that it was only 2 months ago, right? So we are adding resources. We're adding resources in the Health and Group Benefits area that supports, obviously, their historic business. But also the building of OneExchange, we're adding resources. I mean, again, a part of the $0.15 of dilution is adding resources for the building of the Actives exchange. So I think, again, going back, Ashwin, it's a great question. But our approach -- we filled out the platform, our approach was clarified during the quarter, and now we're building towards that. So -- and we will build the appropriate and adequate resources to drive this business forward.

I might just say that was also -- just for us putting together -- expanding the Exchange Solutions segment in terms of being able to re-shift the focus for Exchange Solutions but also being able to free up and be able to have the other consulting operations focus on their core work.

That makes sense. So the new estimates do include -- so the impact of hiring, training, ramp times, all of it is in there, which is a good thing then. I guess, my second question is it would be helpful if you can lay out, at least in ballpark terms, the level of profitability for -- by quarter, perhaps, what should we expect? Minus 20 goes to what by the time 4 2 [ph] rolls around -- for the collection assets that will be in the reorganized Exchange business?

Yes. So I think I'll answer the last part of your question, assuming that that's really the focus area. So the reason for some of the ambiguity, Ashwin, in us talking about when we'll show you segment results is that we named a leader on February 1 for the new Exchange Solutions segment. But there is reorganization in the underlying business that's required to determine exactly which teams come over, how many individuals, and that we're undergoing that process right now. So until we know that exact profile, we can't give you specific numbers on margins for the segment or anything like that. What I can say is that, one, so stepping back to the key elements of the business that will drive what our margin outlook will be, the Retiree -- our outlook, and this is not a short-term, next quarter or 2 outlook but our outlook for the Retiree exchange is that it would be accretive to overall company margins. We expect the Actives exchange to build, again, to a level of at least company margins, if not accretive. The timing there, of course, a little more difficult to predict at this point. And the health and welfare administration business that's coming over from TAS has been a strong business with good margins as well. So I think the questions that you'll be asking once you see what that segment looks like will be more about what it takes us to build that business and what the implications are for margin, as opposed to any questions about really -- or concerns about underlying margins.

So we should look for an 8-K or you do a call or will it be with the next earnings?

Maybe with the next earnings. Again, we've got to reach the conclusions which are targeted to be by April 1 for the organization changes. So...

At this time, there are no additional questions in the audio queue.

Okay. Well, thanks very much, everybody, for joining us. And we'll look forward to speaking with you again in May and talk about our third quarter results. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a wonderful day.