Good morning. Welcome to the Willis Towers Watson Earnings Call. This is Rich Keefe, Head of Investor Relations at Willis Towers Watson. On the call with me today are John Haley, Willis Towers Watson's Chief Executive Officer; and Mike Burwell, our Chief Financial Officer. Please refer to our website for the press release issued earlier today. Today's call is being recorded and will be available for replay via telephone through tomorrow by dialing 404-537-3406, conference ID 3295569. The replay will also be available for the next three months on our website. This call may include forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, which may 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 statements, investors should review the forward-looking statements section of the earnings press release issued this morning as well as other disclosures under the heading of Risk Factors and Forward-Looking Statements in our most recent Form 10-K and other Willis Towers Watson SEC filings. Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this earnings call. Except as required by law, we undertake no obligation to revise or publicly update forward-looking statements in light of new information or future events. During the call, we may discuss certain non-GAAP financial measures. For a discussion of the non-GAAP financial measures as well as reconciliation of the non-GAAP financial measures under Regulation G to the most directly comparable GAAP measures, investors should review today's press release. After our prepared remarks, we'll open the conference call for your questions. Now I'll turn the call over to John Haley.

Thanks Rich and good morning everyone. Thank you for joining us on today's call. Today, we'll review our results for the third quarter of 2018 and discuss the outlook for the remainder of 2018. Just as a reminder, as of January 1st, 2018 we adopted the new accounting standard ASC 606, a detailed description of the impact of ASC 606 will be provided in the Form 10-Q filing and detailed explanations of how the new standard impacted our performance and the presentation of our financial statements has been provided in our earnings release this morning. Our first report the results using the prior accounting standard excluding the impact of the new accounting standard. So based on the prior accounting standard that is without the impact of ASC 606 reported revenue for the third quarter was $1.9 billion, up 3% as compared to the prior year third quarter, and up 4% on a constant currency basis, and up 5% on an organic basis. Reported revenue included $23 million of negative currency movement. We experienced growth on an organic basis across all of our segments for this quarter. Net income was $85 million or up 257% for the third quarter, as compared to the prior year third quarter net loss of $54 million. Adjusted EBITDA was $368 million or 19.4% of revenue as compared to the prior year adjusted EBITDA of $322 million or 17.4% of revenue, representing a 14% increase on an adjusted EBIT dollar basis and 200 basis points of margin improvement. For the quarter, diluted earnings per share were $0.63 and adjusted diluted earnings per share were a $1.62. Overall it was an excellent quarter. We grew revenue earnings per share and had enhanced adjusted EBITDA margin performance. Now turning to the results based on ASC 606 or the…

Thanks John and good morning to everyone. Thanks to all of you for joining us. My comments will reflect our earnings without the impact of ASC 606 unless otherwise stated. In order assist with comparability over prior year period. Now let's turn to the financial overview. Let me first discuss income from operations. Income from operations for the third quarter was $ 66 million or 3.5% of revenue, up 354% from the prior year third quarter loss from operations of $26 million or negative 1.4% of revenue. Adjusted operating income for third quarter was $243 million or 12.8% of revenue, up 10% from the prior year third quarter, adjusted operating income of $220 million or 11.9% of revenue. Income from operations for the nine months of 2018 was $697 million or 10.8% of revenue, up 60% from the same period in the prior year of $436 million or 7.1% of revenue. Adjusted operating income for the nine months of 2018 was $1.3 billion or 19.4% of revenue, and up 10% as compared to the same period in the prior year in which adjusted operating income was $1.1 billion or18.6% of revenue. Now let me turn to adjusted diluted earnings per share or adjusted EPS. For the third quarter of 2018 and 2017, our diluted EPS was $0.63 and negative $0.40 respectively. For the third quarter of 2018, our adjusted EPS was up 45% to a $1.62 per share as compared to a $1.12 per share in the prior year third quarter. The nine months of 2018 and 2017 diluted EPS was $4.58 and $2.36 respectively. For the nine months of 2018 adjusted EPS was up 26% to $7.92 per share versus $6.30 per share in the same period in the prior year. Under the new revenue recognition standard, our diluted…

Thanks Mike. And now we'll take your questions.

[Operator Instructions] Your first question comes from the line of Kai Pan from Morgan Stanley. Your line is open.

Thank you and good morning. The first question on the organic growth, you have nice rebound from the second quarter, if you look at your results towards the segments, it's roughly in line with your global peers. I just wonder could you give a probably more detail about what's the improvement from second quarter to the third quarter. Do you see across your line --are you sort of be able to maintain your share, your competitive position or you be able to gain shares going forward?

Yes. So let me say I think when we had the second quarter call I think we advised people that it was probably better look at the first half as a comparison as to how we were doing against our peers versus the second quarter. Only if you look at the first half, we were at or above our peers generally. And one of the things I think we're delighted with the revenue growth we have here. And we're especially delighted because if you look at it in the third quarter of last year, our revenue growth was generally higher than our peers in the third quarter of last year. So we had tougher comparables, so having tougher comparables and getting the growth we had here we couldn't be happier with the result. And we think that reflects our competitive positioning if we look at the third quarter, the whole three quarters of this year. We think that's a fair look at our competitive positioning.

Okay, that's great. My second question is on the margin. The 200 basis point year-over-year improvements but if-- you also mention your Q&A session on press release that there's a large improvement $32 million in the other income lines. So that probably contributed to most of the margin improvements year-over-year, and so I just wonder what's your view on the underlying basically revenue versus expense gross? And also want to clarify that you said at least 50 basis point improvements versus in 2019, would that imply on the old accounting or new accounting? Basically what I try to get is that your margin next year, will it be like at least 25.5% or 24.5%.

So let me -- I'm going to let Mike talk about the specifics of the $32 million et cetera and how that factors in there but let me just make a couple of quick comments. And first of all, one of the things we said coming out of the third quarter -- at the second quarter call was that we, our expenses were running ahead of where we thought they should be then. And we thought that we could control that. And if you look at the margin improvement we have here, what we've done is we hollered our expense growth down to 2%. So we've had 4% to 5% growth rate and we've had a 2% expense growth rate. That's exactly what we told folks we felt we could do, and that's what's contributing the margin improvement. We think that's something that we can continue to exercise that kind of discipline going forward. I think the 50 basis points that should translate to either revenue standard where as we look at that. That's not impacted as much by the revenues, it's actually an expense control item again. But Mike let --

Yes, John. I would add on the $32 million other income. So just picking it back up on John's comments. so we look at across the segment's we had 220 basis points improvement in margins across all four segments. And as John said, due to 2% management of expenses in addition to that 5% organic revenue growth. The other income was $32 million is in terms of the change that was included in there. And so that was what we see is pension what we see in terms of managing our foreign currency impacts overall. So that's how we think about it.

Your next question comes from the line of Shlomo Rosenbaum from Stifel. Your line is open.

Hello, can you hear me? Okay, thanks. I just want to piggyback off the last question and just ask you first just to break out that $32 million year-over-year increase. How much is pension? How much was FX and how much was that loss from disposal business? Because people look at that pension expand gain is kind of a one-time -ish thing and we're trying to get kind of year-over-year growth in margin excluding that.

I can add a little bit here. If you look at the -- so that's on a GAAP basis that changed on the other income line. We did have adjustments for pension settlement items. So there's a variety of things in there. If you look at the press release and what we adjusted out, if you look at it an adjusted basis, the other income net line I think it's roughly about $12 million difference year-over-year. It's off the income and it's mainly less FX hedging losses that's kind of the composition of that.

So if we're to take it year-over-year, it's really an increase of 12 and most of it as FX is what you are saying?

Correct, less FX hedge losses.

Got it and then Mike is the entire guidance raised just the difference in tax rate?

Yes It is normal.

Okay, great and then can you also go into what's going on with the free cash flow? It sounded like-- you're saying there was an account, it's differences where you put stuff kind of real estate on the cash flow statement, is that something that just came to your attention in this quarter or no --

No. I would say timing is always a challenge in terms of when you communicate things, but what we looked at it was we are completing some additional CapEx spends specifically around our facilities consolidations as we continues in our merger and consolidating office space that we have just as an example. Additionally, you're seeing the additional spend that we're going to do on integration, and that additional drives that incremental cost and we see that benefit obviously in that 50 basis points improvement and moving as John referenced into the fiscal year 2019. So those are just a couple of the bigger pieces of that in terms of our adjustment back to it, but we still look at and say look, we're 60% up in terms of our free cash flow. We not going away from our long-term guidance in terms of where we're going to get to from thinking about free cash flow, but we thought it was appropriate to make sure we gave you and ultimately investors view as to what that would be based on what we know.

So the $200 million difference is how much of it is CapEx and facilities? Is that all of it?

No, no.

It's a number of things, Shlomo. We have the additional, the CapEx was how much?

CapEx was around $40 million

CapEx was around $40 million. We had the additional restructuring of that was like --

$35 million

$35 million, we had and this was something we knew earlier, but it wasn't big enough to necessarily adjust but we had a make an extra $40 million pension contribution to the UK. And so there's -- it's a number of little things like that that most of these are items that we expect to be, I mean the $40 million is a one-off for this year for the pension -- UK pension. $35 million is one of the CapEx increases one-off, so there are things that we don't think will affect it going forward, but they did affect it for this year.

Got it, if I could just sneak in the last one. Hey, John given the decline in the stock price and your confidence and hitting all these margins how come you're just not getting a way more aggressive on the stock repurchases?

Well, I think what we try to do. Shlomo, is we try not --we actually have some metrics where we use as the stock prices lower --will ramp up our purchases a little bit more than we did, but we also are trying to be real careful about not borrowing to buyback the stock. And if you look this year, this quarter I mean given that we had our dividend payments and our stock repurchases, we returned over 80% of our cash flow to shareholders already.

Your next question comes from the line of Mark Marcon from R W Baird. Your line is open.

Good morning. And it's nice to see the progress over the three-year period. I was wondering you gave the guidance for the full year by the, in terms of the segment. I'm just wondering how should we think about the growth in the segments next year and the following year. And specifically IRR was seemed to be quite strong, the commentary also sounded strong. Is it possible that we could end up seeing a little bit stronger growth on an out year basis? Or how should we think about that? Thank you.

So I think, Mark, we'll be giving our detailed guidance for 2019 at the next call, but just to deal with IRR for the moment. They have had a fantastic year. I think it's been -- it's really all the different parts of it as I was going through have contributed, but especially reinsurance has had a very strong year. As I said in the in my prepared remarks, we expect to see this continued growth through the remainder of 2018. The other comment I could give it this time is we've set ourselves up for a tough comparable for 2019 of course with the good growth we've had here. But this is also a business that we like the performance and we like the prospects a lot.

Yes. So tough comp but overall fundamentals continue to be good and then --

Exactly.

Yes and then with regard to today on HCB. Can you talk a little bit about what you think we might end up seeing with lump sums for next year given the change in rate environment. How should we think about that and then you've made some changes there optimizing things to a greater extent. How should we think about HCB particularly given the current economic environment with unemployment rates coming down?

Yes. So I think, first of all, the bulk lump sums are down this year as we had expected they would be. And so I think we have--there's a case where we have an easy comparable compare to the bulk lump sum going forward for next year. Again, we haven't gotten to any kind of detailed estimate on that but I would say overall the decision to do bulk lump sums is as much an arbitrage rate between what the rate you can catch them out that and the accounting rate that you're using, as it is of the absolute level of the rate. So there's reason to do both lump sums even when the rates are low, and there's reasons not to do sometimes when rates are higher, but overall we do think the increase in rates will probably pick up bulk lump sum activity, but again we don't have any real thoughts as to how significant that will be or even if it will be significant. But I think it's certainly not going to be a lower level of activity than we've had this year. So we feel pretty good about that.

And talent and rewards

So another part to your question, Mark, I'm sorry.

Yes. Just the talent and rewards within that, within HCB.

Yes. So I think talent and rewards is one of the areas that we saw, did not perform very well in the first half of the year particularly in the second quarter. And we said then that we would be taking some actions to try to control expenses there and to get the growth up. As I mentioned in the prepared remarks, that's an area that grew about 1% or so. We're actually happy with that because one of the things we've done is made sure that we're trying to focus on the areas that have the growth and the profit potential. And I stress actually growth and profit potential. There are areas and talent and rewards that we see that seem to be relatively high growth and seem to have very little or negative profit. Those are not particularly attractive to us. We want to be in the high profit and the growth areas. And so doing some of that movement to those areas and getting the 1% growth, we like the margins we had and we think we are placed to grow from there.

That sounds great, easy comp, so that sets us up well.

Your next question comes from the line of Elyse Greenspan from Wells Fargo. Your line is open.

Hi, thank you, good morning. My first question is just about your longer-term guidance for a little double-digit EPS growth. So when we're thinking about 2019 should we essentially be using the EPS guidance for 2018 that you gave us today, and then assume double-digit EPS growth from there, since essentially the Delta between new and old accounting should come back next year.

Yes. So I think, Elyse, as I've mentioned in response to a couple of the other questions we're really going to give the detail 2019 guidance at the next earnings call after we're finished with the first -- after we finished with the full year. A couple of comments; one, the idea of low double-digit EPS growth is in fact an aspiration we have over the next medium-term outlook coming up here, but how that factors into any specific year I think we will adjust that as appropriate. That's not to suggest we won't come out with low double-digit growth just that we haven't come out with the actual 2019 numbers yet. Your point is well-taken though that some of the 2016 difficulties that we've had with 606 will those disappear when we move into 2019. And so we actually expect the kind of growth we would see should be more robust.

Okay, great and then is it possible-- can we get the tax rate? How that's running year-to-date on adjusted earnings excluding discrete items?

Well, yes, let me - we pull some data here, Elyse.

We are going to try and do this in real life, Elyse, but --so we will try and mention that in a few more minutes if we --it will pop -- we are working and do another answer.

Okay, yes, because I was just trying to get a sense of like go forward tax rate for 2019 and then the unallocated net that was $65 million in the quarter. Is that the right level to think about for that line on a go-forward basis?

Mike do you want to?

It moves around a little bit, Elyse. I mean I think your estimate we've kind of said that's in the range of where it is but it does move around a little bit.

Okay and then one more just follow up on Kai's question. Your 50 basis points at least of margin expansion for next year. So there is a margin Delta between new and old accounting. So it's essentially that mean that we'll see 50 basis points plus the margin accretion from getting back the earnings that we lost, meaning it could be greater under new accounting than the 50 basis points.

That's correct.

Your next question comes from the line of Greg Peters from Raymond James. Your line is open.

Good morning, and thank you for taking my questions. I was-- I wanted to focus on the integration expense and you called it out and there's going to be more integration expense in 2018 than originally visioned. And I'm just curious about how I should be thinking about this line beyond the fourth quarter because it seems like you're finding additional opportunities for savings. And is it reasonable to assume that there's going to be some ongoing continuing integration or restructuring that's going to sort of part of your longer term operational improvement concept.

Yes. So, Greg, the answer to that is, no, it's going to be zero. Now if there are restructurings that come up in the future, we're going to, we're actually making a distinct effort, we're going to try not to do that at all, to the extent we do it, we'll just take it as part of the normal earnings.

Got it and thanks for that.

It's less than half

Yes, make sense. I guess the second question I would have is perhaps you can spend a minute and talk about some of the moving parts in organic in CRB, North America versus Europe, UK and I know one of the issues you called up before was the market derived income maybe you can update us on what's going on with that?

Yes. So I think our --I think our market derived income is down year-over-year. We see pressure around premium flow into the London market. That's hampering our performance in this space and another important thing is in the prior year period we had several one-time projects that we just don't have this year. And so that's contributing to the overall shortfall, but I would have to say that the London market stands out as a quite a distinction from all the other areas around the globe where we're seeing strong growth.

And just a follow up on that. Your view on Brexit and how it might affect that business, that's my last question.

Yes. I mean, look, I think Brexit is something that as with all businesses across all different areas, we need to be worried about making sure that we can provide continuity of service and a seamless transition for our clients and for -- and indeed for our reinsurance partners post Brexit. And that's really regardless of how things happen. We have plans that we've been working hard on. We are --we've been working diligently to make sure that we're prepared for any different outcome in Brexit. We're very close to finalizing our post Brexit platform including the necessary regulatory approvals. And that's something that we'll be announcing in the near future. We're not able to say anything today, but we'll come out with something soon on that, but we're confident we have a good plan.

Your next question comes from the line of David Styblo from Jefferies. Your line is open.

Hi, good morning. Thanks for the questions. I'm going to maybe try to give you an opportunity to circle back to Elyse's question a little bit as part of this question. But can you help us understand realizing, you don't want to get into specific EPS guidance for next year, what's some of the key headwinds and tailwind would be to that. Obviously, you talked about the increased integration spending yielding another 50 basis points of margin expansion. I think you guys also are not quite realizing the full benefits in this year of the cost energies that run up $175 million. I think the exit run rate goal was $175 million. So I think that provides some incremental benefit next year. Could you maybe quantify how much that would be? And then on the flip side it seems like again kind of going back to Elyse's question at least the taxes reverting back to perhaps a more normalized level for next year would be a headwind. Is that anything you to add on to that just to help us get a sense of moving parts considering that the Street's 10.74% for next year seems to imply pretty low growth especially off the new guidance range now.

Yes. I mean, I when we look at -we feel good about our businesses in terms of their growth prospects going forward. And as I referenced in terms of what we thought we would be in terms of the rates of overall revenue growth and those low to mid single digits for all business except BDA. And really kind of being in that double-digit area, but we feel good about those prospects and obviously as we've continued to perform whether it gives more difficult comps for us no different than we had in this quarter. But we feel that's the kind of right growth and as John said we will update that here in the fourth quarter. As it relates to tax, I would just say and we're continuing to work the real-time numbers here, but as I mentioned in my prepared comments as well that we had discrete items that drove our tax rate down here in the third quarter. We believe that those discrete items will -- some of those will reverse in the fourth quarter. And again doing nothing more than the math and when you look at it at 20% to 21% effective rate, it gets you about a 23% to 27% rate in the fourth quarter in terms of looking at it. As you look at and think about that rate going forward we have no reason to believe it will be different. Frankly, at this time but we'll continue to evaluate all treasury guidance as it's issued and its applicability to us. We do believe we will see some additional rules come in the fourth quarter. We will evaluate those and honestly, we'll update on year end call in terms of what that looks like for us going forward, but at this stage we don't know anything further and that's kind of our best guess and best view, and not guess but our best perspective of it going forward.

Yes and let me just make sure we're clear about this. I think to answer Elyse's questions the discrete item we had in this quarter was about $12 million or something like that. That's going to reverse in the fourth quarter. So when we're giving you the projection of 20% to 21% for the year, that's something that's not affected by this discrete item because we've already assumed that's going to reverse in the fourth quarter. And I guess that's really what probably I think Elyse was asking for is. What's a --how can I get to a more normal tax rate and I think what we're telling is 20% to 21% is what we see as the normal tax rate.

Okay that's really helpful on that part. Can you come back maybe to the margins a little bit because I think that's an area just specifically the cost energies that we are still to generate exit run rate of a $175 million. Is there extra that will annualize next year to that to 2019 numbers?

Yes. Again, we're not in a position to go into any details really on those things, but I would just say, look, we said when we were targeting our margin of around 25% this year that we thought that we would get increases in the years beyond that. And we expect to see when we come out to update on our expected 2019 earnings in February, we'll be coming out with some expected increases in our margins.

Okay, thanks. And then on just the exchanges, sounds like you guys have about 300,000 members that'll be rolling on it at some point throughout the year in 2019. Can you help us understand what that base is or what you're expecting the base to be at the end of this year? So we have a sense of growth for that business. And is there any comments, I don't think I heard any comments about the right retiree exchange. How the-- how is did the prospects look for that growth next year?

Yes. I mean so the growth in the BDA segment is largely a function of the growth in the individual marketplace. The group marketplace is the much smaller portion of that. I don't have the numbers right in front of me in terms of the enrollment. Can I ask you to follow up with Rich on that, but I mean I think here's what we would say is that overall we expect the group marketplace to grow up into the double digits. It'll be a good bit above the double digits probably and a good way into there anyway. And the individual marketplaces probably going to grow in the mid to high single digits. And so that's how the combination comes out right around 10% something like that.

Your next question comes from the line of Tobey Sommer from SunTrust. Your line is open.

Thanks. I was wondering if you could discuss the broad drivers of organic growth not from a market perspective but internally?. Maybe three levers, price, your internal headcount growth whether it's consultants or brokers and their productivity. How would you kind of prioritize those in terms of ascending or descending order of drivers of growth in the quarter? And maybe as you look out which ones do you think will be the biggest contributors?

Yes. So I think look consulting traditionally has been a business that you tend to get, it's by adding consultants that you tend to increase the revenues there. I think in the last decade or so we've seen a little bit more of revenues from increased technology which can give a bit of scale, but I think it's still largely a business which is driven by bodies, and so I think we'll continue to see that is the most important driver although we will see some tools and software and products that are --that'll help. I think in the brokerage business, it's I think it's a similar thing although I-- and I think what happens though is that to the extent technology comes in and we get some efficiencies and make our brokers more productive then it may be that we can get that without increased headcount.

Yes. Maybe John I would just add to your comments on just in terms of the pricing, pricing is really kind of been in that 0% to 1% depending whether you've had losses or not. And so that's really kind of been the overall numbers from a pricing standpoint.

Are you going to be able to generate the kind of organic growth that you're targeting in add ahead and still kind of maintain that 2% expense for us that you mentioned previously?

Yes. So, look, we --the business Willis Towers Watson as a whole, we went out after the second quarter results and said we need to be more disciplined about how we're managing it, and these are the kinds of things we wanted to do. We didn't go out looking to cut out people. We looked to reduce unnecessary meetings and be more efficient the way we held meetings to focus on a lot of their internal expenses and not on expenses that are related to client work. And by doing that we pulled it down to the 2%. We recognize that, and we think that if we continue to do that we can, and that's something that we should be able to continue to do into the fourth quarter and indeed beyond.

Yes and I would add, John, just I mean just every investment that we continue to make or every one of our service offerings has a technology component to it, and it continues to drive some level of productivity overall that we're seeing across the business. But as you commented it before, it's not changing overnight. It's incremental in terms of what's happening.

Thanks. Since the integration period, we're coming to a close, how do we think about your capital of employment as we get into the next few years, assuming that the stock starts short like the better organic growth momentum you have there? Thanks.

Yes. So I think, look, the --what we've always said is if we can find acquisitions that make sense and in organic growth, we --that's actually what we would prefer to do. We prefer to find things that can grow the organization and grow it profitably. When we're comparing that to a stock that we think is somewhat undervalued at the moment, it's hard to find some acquisitions that actually pass those threshold particularly acquisitions of any size. And so we're going to continue though with that overall priority. Acquisitions that make sense would be number one, and if we can't do that we're going to return our cash to shareholders. As I mentioned in responds to a previous question if you look at the last quarter, we returned over 80% of our free cash flow to shareholders. I think that's something that we would be looking to do in the future.

Your next question comes from the line of Paul Newsome from Sandler O'Neill. Your line is open.

Good morning. Thanks for the call. I was hoping you could talk a little bit about what might be or could be possible levers for margin improvements really beyond 2019 and beyond as well and excluding sort of the obvious of just trying to get revenue faster than expenses. Are there other things that you think you can do to improve profitability prospectively?

Well, I mean the obviously answer I think is that technology is making us more efficient, making all employees more efficient in all businesses. And I think that's especially true in a professional service firm like ours. And so we continue to look at the possibilities of using technology in all of our consulting businesses, as well as in our brokerage businesses. I mean I joined the company over four years ago as an actuary and I look at the kind of projections it used to take me a month to do on these enormous spreadsheets, actual physical paper spreadsheets that I had. And today's actuaries press a button and get 10,000 of them in three seconds. So we've seen technology influence everything we do. And I think sometimes we don't recognize some of the incremental things that occur year-to-year, but that would be the biggest part.

And a separate big picture question would be thinking about organic growth prospectively are we past the impacts of the integration at this point even though we're still having I guess into the integration charges? And if that's the case then do we have some of that relief or change or differences as we get past 2019.

I'm not sure quite what your question is. I mean we don't expect to have --there will be no integration expenses going into next year, but you started out asking about organic growth. I'm not quite sure what your question is.

I guess I'm making the assumption that when you're doing integration changes that actually has a negative impact typically on organic growth. And obviously this year has been very strong, and I'm just curious if they're still and in years past you've had lags in organic growth that appeared to have to do with putting the two big companies together. I'm asking if that's in your opinion over and this year and that's we're seeing that or if it's, there's still some benefits to the release, let's call it prospectively.

No. I think that's, I think that's over. In fact, I would say that that was almost wholly a 2016 phenomenon. We had a little bit of, in some businesses a little bit creeped into 2017, but if you look at 2017 we performed as, we grew as fast as any of our competitors. And into 2018 we're doing the same. So, no, we don't see any impact from that.

Your next question comes from the line of Yaron Kinar from Goldman Sachs. Your line is open.

Thanks so much for taking my question. Just want to go back to a free cash flow for a second. Is the software capitalization is that part of the CapEx that you'd called out the $40 million of CapEx or is that separate?

It's separate.

Separate, okay. So $120 million or so of those items that you called out FX and CapEx restructuring that you also have to have the software capitalization. And if we take that and kind of roll forward are you so comfortable with 75% to 80% of the adjusted EBITDA as the free cash flow margin long-term?

Yes. I mean as we say long-term right. I mean we're looking that's where our ultimate goal is into the future, yes.

Yes. But I mean I think the, yes, it's so, a; yes 75% to 80% is the right longer-term thing. We, I think our free cash flow is growing 75% or 72%.

In terms of this probably this year.

And we expect to see a significant growth next year too, yes.

Okay and then my second question were just going back to the brokerage space. We've seen a couple of deals in that space. Do you see that impacting your business whether in a positive or negative way? Have you seen any maybe revenue creepage or talent creepage from some of those deals moving your way?

No, we, I mean I think anytime there's a big deal, there's always some market repercussions that occur there both in terms of the way your competitors are reconfigured, and how they go to market. And in terms of sometimes individuals looking to move from those organizations. And we see a little bit of that but we haven't seen any big impacts. And this concludes our question-and -answer session. I would now like to turn the conference over to Mr. John Haley.

Okay. Thanks very much everyone for joining us on today's call. And I look forward to talking about our fourth-quarter earnings and full year call in February.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.