Heidrick & Struggles International Inc (HSII) 2011 Q1 法說會逐字稿

Welcome to Heidrick & Struggles 2011 first quarter conference call. At this time, all participants are in a listen-only mode. After management's opening remarks, we will open the line for Q&A. (Operator Instructions) At this time, I'd like to turn the call over to Julie Creed, Vice President, Investor Relations. Please go ahead.

Good morning and thank you all for participating in our first quarter 2011 conference call. Participating with me on the call today are Kevin Kelly, our Chief Executive Officer, John Kim, our managing partner of global practices, Catherine Baderman, our Vice President and Corporate Controller, and Korhan Kivanc, Vice President of Financial Planning and Analysis.

As a reminder, we will be referring to supporting slides that are available on our website at heidrick.com, and we encourage you to follow along or print them. As always, we advise you this call may not be reproduced or retransmitted without our consent. Also, we will be making forward-looking statements on our today's call and ask that you please to refer to the Safe Harbor language contained in our news release and on slide one of our presentation.

And now I'll turn the call over to Kevin. He's going to cover slides two through five of the presentation deck that we've posted on our website. Kevin?

Thanks, Julie. Good morning, everyone, and thank you for joining today's call. We're disappointed to be reporting first quarter results that are lower than our original expectations. As stated in our press release, confirmations did not come in as strong as we anticipated in the last week of February and in March. We told you on our year-end conference call in February that we were expecting the Financial Services practice to be challenged in the first quarter, but March was even worse than we anticipated. Our first quarter results reflect these slower confirmations and the timing of our revenue recognition.

As you know, our first quarter is historically never our best of the four quarters, often flat or down compared to the fourth quarter. This year's first quarter results are not indicative, though, of our expectations for full year performance. The Americas region performed well in the first quarter, up to 10.4% year-over-year and with an improved operating margin of 12%. In the Asia-Pacific region, every practice saw an increase in revenue except for Financial Services, which experienced a 33% decline. This hurt the region in the first quarter but we believed it to be specific to the first quarter and have seen great improvements in April.

Europe was also negatively impacted by a decline in Financial Services revenue, but also by several countries that underperformed. Generally speaking, Europe's first quarter results reflected the disproportionate impact of consultant turnover that occurred in the second and third quarter of last year.

We continued to invest in the future and our recruiting efforts were very aggressive in the first quarter. We expect the investments we've made in our people over the last year to pay off significantly. 29 new consultants joined the firm and we ended the quarter with 372 consultants compared to 367 at March 31, 2010 and 347 at the end of December. At the beginning of April, we promoted 16 people to the consultant level and these promotions will be reflected in the second quarter consultants headcount.

As you all know, we spent considerable effort getting our new hires up to speed as quickly as possible by increasing the number and frequency of training and onboarding sessions. Between the new consultant hires last year and 29 year-to-date, I believe that we have tremendous revenue generating potential and the opportunity to increase productivity. The shortfall in revenue and our investment in new hires translated to a short fall in operating income.

Still, I'd like to point out the sequential improvements in reducing G&A and administrative expenses in the first quarter compared to the fourth quarter. The sequential decline of $3.8 million is solid and is progress towards our goal of reducing G&A by $9 million this year. And just to reiterate that although we are disappointed in the first quarter, we have seen trends that are moving in the right direction and are still confident that the revenue numbers will increase throughout the year.

Now, let me turn it over to Julie to go through the numbers.

Thanks, Kevin.

I'm not going to review the numbers that have been covered in our first quarter press release or the slides we posted on our website, but as in past earnings calls, we'll go through a bit more detail on the operating expenses in the first quarter. Please refer to slides six and seven.

Salaries and employee benefits expense in the first quarter of $88.4 million increased by $5.3 million or 6.3% year-over-year. This increase related to fixed compensation, which includes fixed salaries and employee benefits, as well as stock-based compensation expense. Increase in the cash component of $7.2 million included a $3 million increase in base compensation and payroll taxes associated with an 8% increase in worldwide headcount as well as merit increased based compensation. It also included $1.6 million of amortization expense associated with special incentive awards, which were issued in the second quarter of 2010 and $1.1 million of severance expense.

Turning to slide eight, general and administrative expenses increased $1.2 million from last year's first quarter, but were down $3.9 million compared to the fourth quarter. The largest component of the year-over-year increase relates to $1 million of costs associated with our investment in the new search system, which is expected to roll out this summer. The increase also reflects $1.6 million in fees for various professional services, much of which relates to the structural changes we've made in the company, for example outsourcing various aspects of our internal business services, like a portion of our IT infrastructure and help desk support. These increases were partially offset by a decline in premise related expenses and depreciation expenses of $2.3 million.

Many of these cost reductions compared to the first quarter of last year are also reasons for the $3.8 million sequential decline in G&A compared to the fourth quarter, but the sequential decline also represents a decline in expenses associated with process improvement projects and other initiatives that were completed in 2010.

If you turn to slide nine, cash used in operating activities was $80.2 million and we ended the quarter with $92.6 million in cash. As in past year, our first quarter cash position reflects the payment of our 2010 bonuses. During the first quarter, we paid approximately $87 million in bonuses related to 2010. In the second quarter, we anticipate paying approximately $8 million, primarily related to payroll taxes on the 2010 bonuses in non US countries.

With bonus payments behind us, we expect positive operating cash flow during the remainder of the year. We expect 2011 free cash flow of between $25 million and $40 million, and to remind everyone, our free cash flow definition is net of increases in accrued bonuses and CapEx. We still expect 2011 capital expenditures to be in the range of $17 million to $21 million driven by office fit outs and renovation, and our new IT search system. In the 2011 first quarter, our capital expenditures were $4.4 million.

The effective tax benefit rate in the first quarter was 26.3%. This rate was lower than we had expected because we were able to recognize the tax benefits in certain jurisdictions in which we incurred losses. We still expect the full year effective tax rate to be in the range of 42% to 50%. This rate will depend on country specific results and on the initial cost of redesigning our legal entity structure, for example incorporating certain foreign branches. This effort will result in added expense in 2011, but will result in finance and treasury synergies, and a lower tax rate in future years.

And now I'd like to turn the call over to John Kim.

Thanks, Julie. By way of introduction, I joined Heidrick and Struggles about three years ago, was global managing partner of the Financial Services practice. Since June of last year, I've been the managing partner of all global practices.

Given our first quarter results, we have revenue and operating income to make up for in the remainder of 2011. I believe that we have the people and the processes in place to make that happen. As our new consultants get fully integrated, and as our search and leadership consulting teams continue to leverage off each other, especially with our key accounts, we expect both revenue and operating income to pick up across our practices.

Let me give you some color on our practices, referring to slide 15. Our Global Technology and Services practice made up 20% of our revenue in the first quarter. It is off to a fantastic start in 2011 with the revenue up 13% year-over-year. It was the only practice to report sequential growth compared to the fourth quarter. We told you on our year-end call that we expected the industrial practice to be a growth driver for Heidrick and Struggles this year, and in the first quarter, revenue is up 20% year-over-year. This practice represented 25% of total revenue in the quarter. We were active in the mining and minerals sector and we expect the growth in the renewable energy and cleantech sectors to drive demand for our services.

Our Consumer Markets practice generally represents between 17% and 19% of our business. First quarter revenue was up 9% compared to last year's first quarter. Our Life Sciences and Healthcare practice has consistently represented about 8% of our business. About half of this practice's revenue is derived from the Americas region. We expect the emerging markets and the US services sector to drive growth in this practice in 2011. Our Education and Social Enterprise practice is usually just under 5% of our business. However, it delivers significant synergies with our CEO and Board practice by connecting leaders of universities and nonprofit foundations with the corporate board community.

As we've said, our financial services practice experienced a challenging first quarter, but still delivered 25% of total revenue. We believe the worse than anticipated outcome in the first quarter was driven by a tough fourth quarter and harder than normal compensation season. These two factors reduced some of the normal hiring activity and extensions that we would typically see in the first quarter.

Looking at the final week of March and April trends, we feel positive about the four-year potential, especially given what we are doing in corporate and transaction banking, as well as financial services infrastructure. Also, our Private Equity saw a 38% increase in projects from North American portfolio companies and a 17% increase globally. We expect continued growth in this subsector from the middle market lending arena.

Finally, our Functional Practice, recruiting for specific positions within the C-suite, saw an increase in fees for recruiting information officers globally and for recruiting financial officers in North America. With that brief overview of our practices, I will turn it back to Kevin.

Thanks, John. I'd like to spend a few minutes talking about Europe, leadership consulting, and about our cost containment initiatives. Despite first quarter results in Europe compared to the fourth quarter, we see opportunities for growing revenue and reducing costs. We have invested heavily in hiring and onboarding those new hires. Despite pricing pressures on the front end, we've seen good upticks at the end of many of the searches we've conducted this year. Improving productivity, plus our continued cost containment initiatives are the key focal points for us in 2011.

Leadership consulting revenue grew 12% year-over-year but was a little down compared to the fourth quarter. We did see some slowing in one segment of leadership consulting from the fourth quarter, that of talent mapping, but we believe that is more of a function of seasonality. So far, the trends are the same as those we saw last year in the first quarter and we feel very good about the prospects of this business.

While there were some unexpected costs in salary and employee benefits expense during the first quarter, the increase generally reflects the aggressive hiring we've done in the last nine months. Our expectations for improving productivity in 2011 mean that we will continue training and development efforts in order to bring new consultants up to speed quickly, and that we will be proactively managing the underperformers as well.

As for G&A expenses, we have implemented more disciplined and transparent controls. Between cost containment initiatives this year and a fall off in expenses associated with 2010 process improvement projects that were completed, we are making great progress and expect to see a continued reduction in G&A.

First quarter results did not meet our expectations, but remain optimistic about the potential we will see for the remainder of the year. For the second quarter, we expect net revenue in the range of $126 million to $136 million with an operating margin between 4% and 8%. And for the year, we believe that we can achieve net revenue of $515 million to $545 million with an operating margin of between 6% and 10%.

At this point, we'd be happy to take any questions, and as Julie mentioned at the beginning of the call, Catherine Baderman and Korhan Kivanc are also with us this morning. Since early March when Scott Krenz left the Company, Catherine and Korhan have been managing the finance department.

So with that, operator, if you could open it up for questions that would be great.

Operator?

Thank you. (Operator Instructions) Our first question in the queue is from the line of Kevin McVeigh of Macquarie. Please go ahead.

Great, thanks. I wonder, could you just help us bridge the gap a little bit between kind of where the operating margins fell out in the first quarter and how we get to the full year objectives? Just a little more color on that.

Certainly. This is Korhan, the Vice President of Financial Planning and Analysis. Happy to do that. A lot of the margin pressure that you are seeing in the first quarter is a reflection of the revenue pressure that we've seen. Last year, if you look through our numbers you'll see that our first quarter made up approximately 23% of our revenues and typically, the costs that are incurring throughout the course of the year are more uniform than our revenue figures. So we've gone through the exercise of identifying our revenue stream for the rest of the year and studying our expenses. So we feel comfortable with our 6% to 10% margin guidance for the full year right now.

Got it. And in order to kind of reach those revenue objectives, what's peaked in there? Is there a pick up in financial services or Europe coming back? Are there any specific parts of the business that really need to ramp up sequentially?

Kevin, this is Kevin Kelly. Yes, I think first and foremost would be financial services, which as you saw, impacted us not only in Asia-Pacific, but Europe and also North America. The first two months were very slow. We saw a big pickup in financial services the last three days of the month. In conjunction with that, I mentioned we have a number of new hires that have really ramped up quite nicely both in Europe and actually globally. So as they get up to speed, we'll see increases in productivity there and simultaneously, you'll see also increase in revenue in the countries in Europe as well. So it's a combination of those three things.

Okay. Thank you.

Thank you. Our next question in the queue is from the line of Tobey Sommer of SunTrust. Please go ahead.

Thanks. A few questions. One, could you give me your sense for whether the slow down in financial services was market related or was it market share or somehow some other explanatory factor?

This is John Kim. We believe that as we said, one of the main issues that we ran into is that our main set of clients, especially the universal banks, what we call top tier banks, have actually hiring freezes or hiring activities limited to a very certain area. And that has led to the slow down of overall numbers what we usually see in the first quarter. We don't believe it's a market share issue. We know that we are winning the searches. We are competing at the top end so we don't believe it's related to losing the market share.

Okay, and then I guess could you give some more color on the expense side? Were there new initiatives for -- related to compensation or are most of those, the items that impacted the quarter, carry forwards from changes that were implemented in 2010?

On the expense side, what we've seen, Tobey, is that a lot of the initiatives that we invested in, in 2009, 2010 have fallen off. The most significant investment that we'll make this year will be in the new search system, which has been budgeted for. But we've really taken a hard look at all other expenses in the organization over the course of the last three to six months.

And this is Korhan again. From a compensation perspective, you'll see an increase where we've actually had an increase in our base compensation for our employees, something that we had suspended for the previous two years. That's an impact that you saw in the first quarter but overall from an expense perspective, there are some big-ticket items and then there are some continuous improvement items.

And the big-ticket items you'll see real estate savings, you'll see that this year we're not going to have the worldwide consultants meeting. You'll see that the velocity is not going to be impacting our G&A expenses and there's some continuous improvements items. Three main items are leveraging the technology for our internal meetings, returning training and development into its normal run rate, and going back to normal run rate in our temporary [help views]. We went through a major transformation in 2010, which resulted in the use of temporary help that year. We don't expect those numbers to continue in the same levels of 2010 in the new year here.

Thank you, that's helpful. I think, Kevin, you mentioned upticks. Were you referring to in your prepared remarks that final true-up payment being higher? Is that a function of some compensation growth out in the marketplace?

Yes, it is. And what you've seen, and this is changing, and it's a great question. Specifically, over the last couple of years, clients have tended to try to negotiate lower fees, but we've seen bigger upticks in the end, and we've seen those come through very nicely over the course of the last four weeks. So the upticks are continuing to come in nicely, which also helps bolster the top line though.

That is changing, though, as average fees are going up slightly as well, but we'll continue to see probably, again, most specifically in financial services a lot of upticks.

And then my last question, I'll get back in the queue, is for May and June, I'm wondering what your assumption is for confirmations to kind of the nice sequential rebound in revenue and what may give you confidence in that given that just last quarter, February and March didn't quite live up to expectations. Thanks.

I think what we're seeing is you'll see from the slide that shows the confirmations, slide number three, that the end of March was nice, came in very strong. April has continued to be very strong. What we're looking at is the other slide 14, the backlog, I mean the backlog is one of the strongest we've seen in over a year. We've seen an uptick in financial services as well as some of the other industries as well in leadership consulting. So that's giving us the confidence to really be -- excuse me, it's giving us the confidence to hold true to our guidance for the second quarter and full year.

Thank you very much. I'll get back in the queue.

Thank you. Our next question in the queue is from Tim McHugh of William Blair and Company. Please go ahead.

Yes, I wanted to ask, can you talk a little bit about what, maybe it was seasonality, but what you were expecting for March at a simplistic level as you look at the confirmation from month to month. It looks like March was up from February and April seems a little up from March, but the color you're giving seems to suggest a wider swing relative to the expectation than just simply looking at the chart.

Sorry, this is Kevin. It was more timing. I mean what happened in March was it ended up being a hockey stick at the end of the month, particularly in financial services. The last five days were quite unique in terms of what we saw, and of course, given revenue recognition, that rolled into the second quarter, which is the backlog we see. We did see, as I mentioned earlier, Hong Kong had some softness. Huge financial services help for us, as did Europe and North America, but that came back very nicely. So I think we're pretty much on track, but a lot of it had to do with the way we're recognizing revenue and the roll over, and the backlog going into the second quarter.

Okay, and then can you talk about hiring plans at this point? I know you mentioned the promotions and you've hired a lot thus far third quarter. What are you expecting for the rest of the year and then talk about how turnover since bonuses got paid last month.

Sure. In terms of hiring, I think our key focal point as we've mentioned is really onboarding, developing our people in the organization and making sure they get up to speed as quickly as possible. So that is again, what we're focusing on. In terms of hires, we are looking at certain areas, Tim, where we could add individuals but they'll probably be more select as we go into the next few quarters. And then your second question, sorry, can you repeat your second question?

Just turnovers since the bonuses.

Since bonuses, we've lost three people and a lot of it hard to do with performance management and yes, we've lost three people this year.

And just, that's a lot less than last year. I mean I don't know what your comparative number and how to think about that. I'm assuming it's better.

I think as we've mentioned, last year was a unique year for us in terms of the transformation into a leadership advisory firm and we have a lot of great people in the firm. And I think things are going well.

Okay, and then the last one if you could, just the fixed compensation or salary. You mentioned you gave the first increase in a while. Can you tell us what size that was on average?

We've actually stuck with a market driven figures there. It was different in different parts of the world and just one second, please, while we come up with the number here.

The year-over-year impact, Tim, was about $3 million, but that also included payroll taxes and just an increase in fixed comp related to new employees. So I don't have a breakdown of specifically what the base comp increase amounted to.

Okay. Thanks.

Or the merit, I should say merit increase.

Okay. Thanks.

Thank you. Our next question in the queue is from Mark Marcon of R.W. Baird. Please go ahead.

Morning. I was wondering if you could talk a little bit more about Asia-Pac, how you expect things to trend over there and what's the impact of Japan, and how are you dealing with that?

Mark, if you look at Asia's results, I mean we had such significant growth last year. We expect Asia to continue to be buoyant and have seen signs of that. The two biggest issues that we had in Asia in the first quarter were, number one, as you mentioned, Japan, but obviously we had employees that were out of the office for anywhere from two to three weeks, and clients that were out of the country for up to three to four weeks. So that had somewhat of an impact in the first quarter and we're monitoring that closely.

The second issue that we had was a financial services impact in Asia in the first quarter and that started to bounce back nicely. So net-net, I'd still say we're very confident in terms of our Asia-Pacific business and continue to dominate out there. Our goal now is to continue to drive and grab market share across the region and make sure we have a good, broad, or excuse me, a broad portfolio of practices.

Would you expect Asia-Pac to be your strongest growing region?

It will continue to be our strongest growing region, although we have tremendous opportunity in Europe as well. And even North America, I think there's -- Asia will be our strongest growing region. I think Latin America, particularly Brazil, provides a tremendous opportunity for us. And Europe, there's buckets or pockets of countries providing a tremendous opportunity too, and here in North America we've started to and continue to grab market share, particularly in the CEO and board practice.

Mark, this is John Kim. I'm going to just focus into two countries, China and India. We have a very strong operation in Australia, but China and India is continuously be our investment and focal point of the growth, and we are trending nicely in those countries. And we expect greater and bigger things this year and also years to come.

Great, and how big is financial services in Asia-Pac?

Mark, I'd have to get back to you on that one. I don't have a breakdown of how financial services has, in terms of numbers, equates to the aggregate number. So I'm happy to circle back, although Julie came up with it. It's about $25 million -- 25%. Excuse me.

Great. And then should we see the margins go back to historical norms, or because of the investments that you're making in China combined with maybe some continued dislocations in Japan, would that pressure margins in that region?

I believe that margins will get up -- back up and given the top line growth there, a lot of it hinges on the top line growth, which we continue to expect in Asia-Pacific. So we believe margins will get back up to where they were before.

Great. And then what's still to come on the real estate savings? If we take a look at the Q1 real estate expense, how much more do we -- can we potentially save by the time we get out to the fourth quarter?

Oh, by the fourth quarter, I don't know if we'd be that -- willing to go to that level of detail, Mark. As you know, we have a pretty hefty goal that we set forth at the very, very beginning of '09 of $10 million in savings. I think we've got through about $5 million of that. A lot of it just is dependent on -- a lot of it is in market rates and be the -- when leases are expiring and how we renegotiate those. But as you can see by first quarter, we're still making good progress and we're still trying to get to that goal of $10 million. But that's over five years.

Right, and any gaping holes still in Europe or have all the practices been filled at this point?

Mark, we have addressed most of the gaps. When you look at country by country, there could be one or two gaps that we are still looking to address, but we believe that we currently have teams in place finally to address those gaps that have left open by departures last year.

Great. Thank you. I'll jump back in the queue.

Thank you. Our next question in the queue is from Giri Krishnan of Credit Suisse.

Hi. Good morning. I guess drilling drown, trying to drill down in financial services, could you maybe address what areas do you expect to see, and as we look through the rest of the year, are there some sub-segments that we should expect to be stagnant? Could you maybe give us a little bit more color on just the financial services expectation?

Sure, Giri. This is John Kim. Beginning of this year, we saw the trend, actually start from the fourth quarter of last year. We have realized that the big banks, the big relations that we used to carry here are not going to make a huge hiring beginning of this year. Since then we have looked into the market and we actually have created an additional sector called corporate and transaction banking. This is pretty much of catching those corporate relationships, more relationship manager type of people, plus the transaction banking side of the business where we as a firm didn't really play as in depth.

And we have made a strategic decision to create a team around the globe to do that. And with that first quarter and especially end of March in the first quarter this year that we are start to winning some big searches in that space. And we expect to see the growth, and continuous growth and attention in those spaces, and plus financial services infrastructure side, which is the CFOs, CIOs, all the back of the (inaudible) and risk size continues to be compliances. We share a lot of different areas that is continuously going to be trend. And also, in addition to that we have also started to focus on the international banks and the smaller banks that is keen to enter different markets and we expect to see the growth in that area as well.

Okay. Then as we, I guess. Look at consultant productivity, I think last quarter you guys had mentioned that in Europe you expect sort of maybe a 12 to 18 month time frame for when you expect that to get to full productivity. Is that timeframe still reasonable? Is there any reason it's changed or gotten better or worse?

Yes, we do and there's some good signs in terms of increases in productivity. As we mentioned last year, we have a number of new hires, five to be specific, that are in the top 100 consultants after less than 12 months. We have 20 that are in the top half of our consultants. So the onboarding is truly working. We have a goal of getting to $1.8 million in terms of productivity and we believe, given the number of new hires in the organization, it's only a matter of time before we get there and are confident that this number will continue to increase.

And that $1.8 million, just to clarify, is that an end of year, by the end of the year or is that a full year expectation?

No, Giri. That's over the next couple of years.

All right. Okay. Thank you.

Thank you. Our next question in the queue is from Kevin McVeigh of Macquarie. Please go ahead.

Great. Thanks. Just a couple quick housekeeping if I could. What were upticks in the first quarter in terms of percentage of revenue overall?

Kevin, that's just not the level of detail we go into in terms of breaking revenue out like that.

Julie, could you help us directionally on maybe a range historically of where it's been and did it fall within that range, outside that range?

The problem is, is that with upticks, a lot of it is driven by the market. As Kevin mentioned, when we see a lot of pricing pressure we agree to a lower up front, but then get the balance of the fee on an uptick. So it's hard to generalize and I don't think we want to put out a percentage out there. We haven't in the past. It does vary by quarter. One big large search and that could make or break an upticks or the level of upticks in any quarter. I don't know, Korhan, if you want to add to that.

No, I think that's very consistent with what we are seeing right now. The pressure on retainer is relieved by the size of the upticks and that shows our success in placing successful candidates for the openings that we're working on, but the timing of that is very, very difficult to predict.

Okay. And then you mentioned pricing pressure a couple times, particularly in Europe. I'm a little surprised given where we are in the cycle that you're seeing this type of pressure. Where is it coming from and is it still kind of, is it impacting the standard third or is it still on the admin side?

It's not on the one-third. It's more of, as I mentioned on the call before, historically the one-third will true up vis-a-vis the uptick. But what we've seen historically if we have a $450,000 search, the fee would be $150,000 plus or minus. Instead of getting $150,000 retainer we may end up with $120,000 retainer. So it's that minus 30 where we're seeing some of the pricing pressure up front. That has started to come back, but we're still seeing in some areas some pricing pressure and in others there's no pricing pressure at all.

So we're optimistic in terms of the direction that's heading but we're not quite there yet.

Got it. And then just one more if I could. Could you give us kind of revenue trends in financial services on a monthly basis through the quarter and then what you're seeing in April as well?

That's just a lot finer detail than what we have provided in the past, but consistent with what we've said about our confirmations in general. Between what we saw in January and what we saw in March, and what we're seeing in April, we are seeing the momentum build up not only in financial services but across the board as well.

Okay.

Thank you. (Operator Instructions) We have a question of Tobey Sommer of SunTrust. Please go ahead.

Thank you. I was wondering if you could give us some color on how we should look at the business on the expense side between fixed and variable, and any thoughts you might have on incremental margin given, I guess, some of the expense growth happening on the fixed side in the quarter and some of the compensation changes that you implemented in 2009 and 2010. Thank you.

Tobey, are you speaking specifically to salary and employee benefits or total costs including G&A?

Total cost, but I'll let you approach it from multiple angles if that's helpful. Thanks.

Korhan Kivanc From a compensation perspective, we had several initiatives going on right now to reduce the impact of fixed compensation on our P&L. Our goal is to minimize that number and increase the flexibility that we have on the variable section of our compensation. The G&A, as we stated in the times past, we are trying to drive that number to $110 million in the long run and we are committed to that G&A level. We're making, as you saw from the fourth quarter of last year to the first quarter of this year, we made very substantial progress in that regard and will continue to do that.

As a result of reducing [safe] compensation, and reducing G&A, you'll actually see that translate into stronger margins.

Thank you, and I'm showing no further questions in the queue.

Fine, well, I'd like to just finish up by thanking our consultants around the globe for their continued efforts on a daily basis and appreciate you getting on the call today. As I mentioned earlier, we are -- we did have a rough first quarter but we're optimistic in terms of what we've seen over the last few weeks and our outlook for 2011. So thank you everybody and I hope you have a good day.

Thank you, ladies and gentlemen, for joining today's conference. That concludes the program. You may now disconnect. Have a great day.