Brad Hale: Yes, I would characterize it as two things at least: One is, I mentioned $7 million of contingents that we would expect to largely show up in Q4 this year that did not show up in Q4 last year. And as you know, that’s super margin accretive. In addition, we’ve mentioned the headwinds. We saw rain exposure in the IS business last Q4. And based on the trends we’re seeing now in that region exposure normalizing, we would expect an uplift in that business, which bridges the full 450 to 600 basis points of margin expansion I mentioned.
Trevor Baldwin: Yeah, this is Trevor. I think it’s worth really underscoring the momentum we’re seeing in underlying net new client wins. And as Brad mentioned earlier, it was a fantastic quarter for the business, hitting on all cylinders, broad-based double-digit organic growth across all segments. But despite all of that, the strength of the quarter is not even fully highlighted in the financial results. As a result of the contingent commission timing we mentioned in UCTS and elsewhere, we’re incredibly excited and bullish about what we’re seeing in the business. The work we’ve done to really stitch the business together through all the hard work around integration and development and deployment of technology, how it’s enabling us to go to market effectively and efficiently, how we’re seeing our colleagues work together across the platform to drive really fantastic results and outcomes for our clients.
And all of that’s resulting in really, really strong momentum on core client commissions and fees and we expect that to continue.
Elyse Greenspan: And then Trevor, last quarter on M&A, right, you said even though you guys will be within your leverage target at the end of this year. It sounds like you might go back into deal mode next year, but it’ll be a little bit of a different strategy than in the past. Is that still the same, I guess, M&A blueprint that you guys have today?
Trevor Baldwin: Yes, that’s the right way to think about it, Elyse. Our priority continues to be delevering the business. As we sit here today, we’re a short few quarters away from having a very different free cash flow profile for the overall business. And as a result, we’re going to have a lot more flexibility from a capital allocation standpoint, that’s something we’re very much planning for and looking forward to. M&A has been an important lever for us in the business over time and one that we’ve been able to successfully pull to create a lot of value for shareholders. And it’s one that we expect to continue to do so with. All that being said, M&A is going to look differently for us going forward when we came public in October of 2019, at roughly $135 million of revenue getting the scale was existential.
We were at a period in time where there was a gold rush of sorts for the industry, broadly around really large high quality firms that were coming to market. And I’d say better than anyone else, we took advantage of that time and we’re able to partner with what we believe to be among the highest quality, most differentiated platforms out there. And you see that represented in the continued durability of our outsized organic growth. And I’m beginning to see that flow through in the underlying margin accretion, as we’ve brought those businesses together and lots more to come there. Going forward, we would expect M&A to be a bit more episodic in nature. We find ourselves today at a time where M&A volumes are down, I’ll call it 35%, 40% year-over-year, largely a function, I think, of where cost of capital is and the impact that’s had on some of the more highly levered acquirers in the space.
So we’re going to we’re going to sit back. We’re going to pick our spots where focus has always come first and foremost on culture and alignment. And then equally so on, strategic fit and know what makes financial sense. And we need to check all three of those boxes. So I would not anticipate us doing any meaningful amount of M&A through the balance of this year. And from there, it’s going to be episodic in nature to a degree where I’m not sure I’d suggest you put anything in your models, but we’re going to be opportunistic. And when something strategic comes out, that makes sense where they’re strong fit, we’re going to be all over it. And we’ve proven we’ve got the playbook. We can identify those high-quality businesses. We believe and history would suggest we have an offering that is attractive to those high quality firms and those principles that aren’t looking to sell out but sell in and become part of a larger scale enterprise, where the very best and brightest of our industry can come together.
And ultimately, through our shared experiences and our collective expertise, generate and create outcomes that otherwise would be unable to do on our own. So we’re super excited. We feel like we’re really well positioned. And importantly, the business is performing exceptionally well on an underlying basis, both from a top line and bottom line margin accretion. And so, we’re not in a position where we have to do anything and we can pick our spots.
Operator: [Operator Instructions] Our next question is from the line of Pablo Singzon with JPMorgan.
Pablo Singzon: Hi, thank you. There was a note in the 10-K about a Founder Shield being moved from UCS interest advisory. How much did that it changed the growth profile in each of those segments? Or was it not meaningful enough either way?
Trevor Baldwin: It was not meaningful enough either way, Pablo, it didn’t change materially.
Pablo Singzon: Okay. And then, Trevor, I was hoping you could unpack your commentary on new business was a tremendous number, right? I was curious to hear if you’re seeing it broadly speaking, or is it concentrated or geographies or practice areas and serve any color commentary you can provide there?
Trevor Baldwin: Yes. The new business was broad-based across our footprint. So I wouldn’t say it was concentrated in any one area, Pablo, which is fantastic to see. We’ve brought together businesses with deep expertise across a number of areas, including real estate, oil and gas, construction, private equity and M&A, technology and life sciences, and we’re seeing big wins in all of those areas. And importantly, we’re seeing parts of our business that didn’t have that expertise before they join The Baldwin Group leverage those resources and those capabilities as a result of how accessible we’ve made them through the work we’ve done to integrate this business and how we’ve aligned and assimilated around a common go-to-market model.
