Heidrick & Struggles International Inc (HSII) 2017 Q4 法說會逐字稿

Good day, ladies and gentlemen. This is Heidrick & Struggles Fourth Quarter 2017 Conference. This call is being recorded. It may not be reproduced or retransmitted without the company's consent. (Operator Instructions) Now I'll turn the call over to Julie Creed, Vice President of Investor Relations and Real Estate. Please go ahead.

Good afternoon, everyone, and thank you for you participating in Heidrick & Struggles Fourth Quarter and 2017 Conference Call. Joining me on today's call is our President and CEO, Krishnan Rajagopalan; our Chief Financial Officer, Rich Pehlke; and Mark Harris, our Deputy Chief Financial Officer.

During the call today, we will be referring to supporting slides that are available on the IR home page of our website at heidrick.com, and we encourage you to follow along or print them.

Today, we'll be using the terms adjusted operating income, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income and adjusted diluted earnings per share. These are non-GAAP financial measures that we believe better explain some of our results. A reconciliation between GAAP and non-GAAP financial measures can be found in 2 different schedules of the end of the release and in our supporting slides. Throughout the course of our remarks, we'll be making forward-looking statements and ask that you please refer to the safe harbor language contained in our news release and on Slide 1 of our presentation. The slide numbers that we're going to be referring to are shown in the bottom right-hand corner of each slide. Our annual consolidated results, which Krishnan will generally talk to, are on slides 2 through 19.

Krishnan, I'll turn it over to you.

Julie, thank you. Good afternoon, everyone, and thank you for joining our call. We've been quite busy since we last talked to you at the end of October. I'm proud of what our employees have accomplished and I'm excited about how we're positioned in 2018. I'll summarize some of the highlights in 2017, the strategic actions we took and what we've accomplished to-date in 2018. Later, I'll discuss our strategy and initiatives for the balance of the year. So let me start with 2017.

Today, we're pleased to report a fifth year-over-year revenue growth and the highest net revenue achieved in the company's 64-year history. Net revenue of $621 million was up almost 7% or $39 million. This growth was primarily driven by Executive Search, where revenue was up 9%. Following our promotion of a record 28 people to Principal consultants in January last year, we made steady improvements to productivity throughout the year, achieving $1.7 million revenue per consultant in the fourth quarter.

Leadership Consulting grew approximately 6% in 2017. It was a transition year for this business. Once we decided last summer that we would combine Leadership Consulting with Culture Shaping, we made the decision to slow our hiring initiatives while we focused on key elements of the integration, like product and service development and delivery, our go-to-market strategy and the organizational structure. With this completed, we are moving forward at full speed.

Although Culture Shaping net revenue declined compared to last year, both revenue and profitability improved throughout the year. Fourth quarter revenue increased sequentially for a second quarter through a continued focus on driving growth. We took several charges throughout the year, which impacted our reported profitability, including noncash impairment charges and a restructuring charge. We believe that these strategic actions, while difficult, better position us to move expense capital used for administrative support into market-facing investments in people and technology. We expect they will also help us deliver a sustainable improvement in operating margin.

Excluding the unusual charges, adjusted operating income increased 17% compared to 2016, and the adjusted operating margin improved to 6.7%.

And now, on to 2018. Earlier this month, we announced the market launch of Heidrick Consulting, combining our Leadership Consulting and Culture Shaping businesses into a single, integrated line of advisory services that complement our search capabilities. We named Andrew LeSueur to lead Heidrick Consulting. Mike Marino, the former Managing Partner of Culture Shaping, retired. Colin Price, the former Managing Partner of Leadership Consulting, returns his focus to client service while further developing and deepening the firm's intellectual property and thought leadership. And we continued to add bench strength. In January, we closed the acquisition of Amrop Denmark, adding 6 Search consultants to our Nordic region. And reflecting on our well-established development and training program, we promoted 14 to Principal and 17 to Partner in Search, and we promoted 3 to Heidrick Consulting Partner as well.

Before I turn the call over to Rich to go over the financials, I'd like to take a minute to acknowledge that this is his last quarterly conference call at Heidrick & Struggles. Rich will be retiring after 7 years as Chief Financial Officer. I would like to thank him for his strong financial leadership. I'd also like to introduce you to Mark Harris, who has been working hand-in-hand with Rich and his team since the 1st of February in order to ensure a smooth transition. We're excited to have Mark on board. He brings a wealth of global experience in guiding growing public and private enterprises. Most recently, Mark was CFO at Hercules Capital, a business development company with responsibility for finance, accounting, operations, treasury, legal and Investor Relations. Hercules saw a significant increase in earnings per share and in total shareholder return during his tenure.

Please join me in wishing Rich the best in his upcoming retirement and welcoming Mark to the firm.

Mark, would you like to say a few words before we turn the call over to Rich?

Absolutely. I couldn't be happier to join Heidrick & Struggles family, a firm that I've revered during my professional career through my frequent experiences. It doesn't come as a surprise to me that Heidrick, who's a leader in advising clients on leadership talent and development, has provided me with such a smooth transition into a role as important as this one. It's been advantageous to be able to partner with Rich to leverage his vast knowledge and experiences of this business, which afforded me the ability to get up to speed so quickly. Rich, thank you so much for your mentorship over the last month.

In addition to Rich, I would also like to thank the financial and operational teams that I'll be leading, the support teams that I've engaged with and the leadership team who have all been amazing during this transitional process.

Finally, I'm elated to be joining such a talented executive team, coupled with the ability to work with such a distinguished Board of Directors to create the next chapters of our firm.

Rich?

Thanks, Mark, and let me add my welcome. It's been a pleasure to work with you this past few weeks and I believe you're a great addition to Heidrick & Struggles. And thank you, Krishnan, for the kind words as well. And good afternoon, everyone.

Krishnan hit on the highlights of 2017, so I will discuss the fourth quarter results, which are covered on slides 21 through 35. Revenue in the fourth quarter came in stronger than our guidance, primarily in Search, as a result of higher upticks, higher confirmations and the timing of those confirmations. Every region contributed, as did the 4 major industry practices. The increase in Search revenue resulted in higher bonus accruals for the quarter and for the year. This increase in salaries and employee benefits was partially offset by a decline in G&A in the fourth quarter, which was down $4 million or 11%.

As preannounced in early January, we took an $11.6 million noncash impairment charge in the fourth quarter to write off the remaining carrying -- the carrying value of the remaining goodwill and intangible assets related to our Leadership Consulting business. We also recorded $15.7 million for a strategic restructuring plan to reduce overall costs and improve efficiencies in our operations. Reflecting these charges, we reported an operating loss in the fourth quarter of $18.8 million.

Referring to Slide 27, excluding the charges, adjusted operating income in the fourth quarter would have shown a year-over-year increase of 10% compared to the 2016 fourth quarter.

Moving down the income statement, we had additional charges in the quarter as a result of the enactment into law of the U.S. Tax Cuts and Jobs Act in December of 2017. We recorded a $14.5 million charge related to the write-down of the value of our U.S. deferred tax assets as a result of the reduction in the U.S. corporate income tax rate from 35% to 21%, and another $9.2 million to establish a valuation allowance for our foreign tax credit carryforwards because provisions in the new legislation will likely restrict their use going forward. I'll have more to say on and our tax rate in a moment.

If you look at Slide 34, excluding the impairment and restructuring charges and the 2 tax-related charges, adjusted net income would have been $2.8 million in the fourth quarter and adjusted diluted earnings per share would have been $0.15. This compares to 2016 fourth quarter net income of $500,000 and diluted earnings per share of $0.03. Referring back to slides 17 and 18, adjusted net income for the full year 2017 would have been $20.9 million, and adjusted diluted earnings per share would have been $1.09, with an effective tax rate of 48.9%.

Those of you who have followed the company know that our book effective tax rate has been volatile, principally due to the inconsistency of results in many of our foreign jurisdictions. Our cash tax rate has been more consistent, averaging closer to 40%. For 2018, we are still reviewing the full effects of the other provisions in the tax reform legislation, but based on the current expected mix of income, we think our effective tax rate will decrease from the mid to high-40s to something in the range of 38% to 40%, primarily as a result of the U.S. corporate income tax rate reduction. From a cash perspective, this would translate to between $4 million and $4.5 million of cash savings.

Now referring to Slide 36. Cash and cash equivalents at December 31 were $207.5 million compared to $165 million at December 31, 2016. The increase in cash balance compared to the end of 2016 reflects stronger operating cash flow and fewer acquisition-related investments, offset by higher bonus payments paid in 2017. The company's cash position builds throughout the year as we accrue for bonuses. Earlier this quarter, we paid approximately $13 million in compensation related to the portion of consultant bonuses that are deferred each year. In March and April, we will pay out approximately $148 million in variable compensation related to 2017 performance. We also expect to pay approximately $13 million in the first quarter related mostly to severance to complete the restructuring.

Absent any potential acquisitions, we expect free cash flow to increase again in 2018 as a result of improved operating performance, lower expected capital expenditures and lower tax rate.

Now before I turn to first quarter guidance, let me talk briefly about the new revenue recognition standard that we are adopting effective January 1, 2018. The primary area where the new standard will apply to Heidrick is upticks. Upticks are fees that we receive for completed search where the first year compensation paid to the hired candidate was higher than estimated in our original contract. In the past, we recognized uptick revenue at the time the amount was fixed and determinable, which generally coincided with the completion of the search. Under the new standard for revenue recognition, we will need to estimate the potential upticks for each search and recognize as revenue over the life of the search, utilizing the same model we currently apply for the recognition of retainer revenue. This is expected to accelerate the recognition of search revenue related to upticks. We will continue to monitor and adapt our revenue recognition models over time, but at this point, we do not believe it will materially affect the run-rate of revenue each quarter. There will be more detailed information in our 10-K disclosure, but the guidance I will speak to next reflects the application of the new standard.

Now let me speak to directly to the guidance for the first quarter and then Krishnan will talk more generally about the year. Our Executive Search backlog is shown on Slide 37 and it is quite healthy. We still have a few days left in the month of February but our search confirmation trends are shown on Slide 38. Other factors on which we base our forecast include our revenue recognition model, anticipated fees, the expectation for consulting assignments, the number of consultants and their productivity, the seasonality of the business, the current economic climate and foreign exchange rates. We are forecasting a good 2018 first quarter with expected net revenue of between $150 million and $160 million. This compares to reported net revenue in the first quarter of 2017, which was $140 million.

And with that, I'll turn the call back over to Krishnan.

Thank you, Rich. We have started 2018 in a position of strength. We have momentum in the market and we're excited about the opportunity ahead of us. Let me first mention how incredibly energized I was by the meetings and interactions we had at the World Economic Forum in Davos this year. They highlighted just how relevant our leadership advisory services are to the world's most influential businesses.

Never before has talent, leadership and culture meant so much to building and sustaining competitive advantage. Never has the pace of change and disruption been so intense. The market for Executive Search remains robust and the value of visionary leadership has never been greater. Now that we've launched Heidrick Consulting, we can better capitalize on the market for advisory services as well. There's a significant opportunity for Heidrick, enabled by our brand to take a bigger share of both markets.

We've also positioned our business for growth with strategic actions, including the restructuring at the end of 2017. We've reduced our cost structure and realigned cost from administrative to market-facing. We will invest much of the savings realized through the restructuring into people and technology.

We have 4 priorities for 2018 across the enterprise. First is growth, increasing the scale and impact of both our business segments. In Executive Search, we intend to build on our momentum. We've invested significantly in this business in the last few years and are now positioned for more profitable growth and to take market share in every region. We will hire selectively, focusing on growth markets and healthy economies where we should have a larger presence.

For Heidrick Consulting, we will continue to scale the business to increase our impact with clients building on the success of our platform, Accelerating Performance. We will invest in new consultant expertise, new service offerings and scalable tools and methodologies.

Our second focus for 2018 is on cross-enterprise collaboration. Our Search and Consulting teams will work closely together to provide our clients with an integrated suite of leadership advisory solutions. We are cross-training consultants in each of the businesses to look for opportunities to provide our clients with more, acting as trusted advisors. We are broadening our key account focus to bring the full power of Heidrick to our largest clients.

Our third focus is on driving a premium service experience for our clients. We have developed a comprehensive assessment framework using our proprietary IP derived from years of research. This framework connects directly to our foundational Accelerating Performance research, so we can demonstrate how our assessment of candidates correlates to performance. We now have 100% of our search teams trained on this new assessment methodology and are actively implementing with clients globally. And we have begun rolling out a new client portal solution, which allows us to digitally engage with the leading organizations we serve. We showcased this new capability to a number of client executives at Davos and their response was overwhelming. We believe this will further differentiate us competitively, and the standardization that it brings the process will also support margin improvement.

Finally, our fourth priority is to maintain a close focus on cost containment initiatives to further improve our cost structure. We are making cost control part of our culture and we will not lose this focus.

With our positive momentum and favorable market conditions, I'm excited about the year ahead. You see that reflected in our first quarter guidance. With our 4 focus areas, we will make further progress toward profitable growth. It's going to be an important year for this firm.

I want to again thank our employees around the firm for their hard work this past year, helping us achieve record revenue and significant gains on so many initiatives. I'm truly excited about what we will accomplish as a team this year.

Now we'd be happy to take your questions.

(Operator Instructions) We'll go first to Tim McHugh with William Blair.

Just wanted to ask first on kind of the comments about the restructuring program and reinvesting many of those proceeds. Can you talk about, I guess, how much...

(technical Difficulties]

Tim, go ahead. You got cut off. We want to make sure we get your questions in.

Yes. Sorry. Just the restructuring program, how much of the savings are you going to reinvest versus allowed to flow through to the bottom line, I guess, as you think about the full year?

So Tim, look, most -- I think, you're aware, most of our savings from the restructuring came in the form of headcount. All of that savings was identified as been achieved. Most of the individuals identified for the restructure are now off the payroll and we reduced our headcount by approximately 14%. So our goal is to build a profitable and sustainable business model. We now have the opportunity to do that and invest in the business, market-facing hires, as we said, in product and technology to continue to scale Search and particularly the Consulting business. We're in a pretty dynamic, fast-changing market, so we're going to closely monitor the balance of investment with the opportunity for growth. The pace of that investment and the potential return on those investments will determine how much falls to the bottom line. So we're committed to improving the operating margin in the near term as well, but we also need to invest for the future. So we will be quite balanced in how we do that.

Okay. Can you talk about what's happening with compensation expenses, I guess. I know there sometimes lumpiness with bonus accruals but even on a full year basis, if I look, of the revenue increase, I think it's like 88% went into compensation and salaries. And so, I guess, talk about -- is it a mix of revenue? I mean, why, I guess, was it -- did it go up so much as a percentage of revenue this past year?

Tim, it's Rich. I'll take a crack at it and then we'll see if Krishnan wants to add on it. A couple of things drove the increase in comp and benefits. Number one, just the overall performance factor of our business in terms of how we run our model and our variable compensation model resulted in a higher payout than a year ago, which drove dollars. Number 2 is the increase in people. It's through the -- we have been growing the base of market-facing people and the leverage model to support those people over the last few years since compensation expense grew at that level as well and that was part of what drove the value of the increase. So this gets back to the comment that Krishnan just made about the people, we're in a pretty -- we still remain in a strong environment for the core business. And we have continued to invest at a very healthy pace to build the market-facing side of the business. And with the moves that we've made with the restructuring, we hope to give a little bit of oxygen back to the expense capital where we've shifted that away from more support to market-facing. But it's really driven by the number of people and the performance of the business.

Okay. And then, just one -- sorry, go ahead.

I was just going to add, typically, you're familiar in our fourth quarter is where people come in to being bonus-eligible so the accruals pick up in the fourth quarter as well.

Yes. And we did have a pretty heavy pop on revenue in the fourth quarter that was higher than our expectations, which also drove up the comp expense a little bit farther as well.

And just one last one. Just to be -- most of the restructuring program was not, I guess, front line-focusing, is that correct? It was more G&A type?

It was G&A-related expenditure or some support or business support operations out in the field. So it did have a geographic spread, but it was more on the support side than rather client-facing side.

We'll go to Kevin McVeigh with Deutsche Bank.

Rich, congratulations on your retirement and, Mark, welcome aboard.

Thanks.

So any sense of -- the revenue guidance looks really good relative to The Street. What gets you kind of towards the lower end of the range versus the higher end? And it sounds like the upticks won't appreciably impact kind of the revenue in the quarter, but is there any way to kind of size how much that kind of impacts the guidance as well?

Yes. The revenue recognition standards, if it's going to help the guidance at all, we're talking, on a quarterly basis, somewhere probably in a more like the $1 million to $2 million range. So it's not really that material. We're going to do what's called a modified retrospective application of the standard, which means we're going to book a catch-up entry for previous upticks, and so that's why it won't have that much difference, we won't be restating prior year financials, much like most other companies have adopted the standard. So that's not really a big factor. What really drives our -- when you think about it, what drives our revenue, especially in terms of some of the clouded visibility around it, is really the timing and the value of the confirmations because that's what kicks off the start of a revenue recognition model. One of the reasons we had a strong fourth quarter in 2017 is that we had a lot of high-value confirmations come earlier in the quarter, which helped feed the revenue recognition model, as well as the fact that we had stronger upticks in the quarter as well. So it's really going to be -- if we have volatility in the revenue stream, it's largely driven by the timing of the confirmations as well as the upticks.

I'll just add there as well, look, we're off to a nice start in January and February. And given the momentum we had in the fourth quarter, we feel comfortable with our guidance.

For sure. And then, just -- I know I've asked this in the past, but any sense of when we get to the point where we'll be able to start talking EPS again, I know there's obviously been some -- a lot of volatility on the tax rate, but just now with the new tax legislation, I don't know if that affords you an opportunity to maybe give a little more disclosure on the guidance?

Well, we still haven't decided to go forward with any profit guidance at this point in time, Kevin. We evaluate the decision periodically, but the business from a standpoint of visibility and especially when you talk about things like our foreign jurisdictions, many of those decisions come down to the wire at the end of the year. So at this point in time, there's no plan to do that.

Our next question comes from Tobey Sommer with SunTrust.

I was wondering if you could kind of give us some color as to what led to the restructuring action. Because we're in year 9 of the economic expansion, the company itself has experienced recently relatively strong top line growth, so if you could kind of frame that for us, it'd be helpful.

Sure. And it's Krishnan in here. I started -- as I took over as CEO, began to really think about our cost structure and sort of where we're deploying expense capital to support revenue growth. And in our analysis, led me to conclude that there were opportunities to be able to redeploy that in a different way, which is what led to this restructure. Ultimately, there's opportunities here to drive revenue in a tighter fashion without that expense capital and that's a decision that we made. We went through some pretty thorough analysis to understand what our benchmarks look like and became comfortable with that to be able to take the actions.

The one thing I'd add, Tobey, to that is that, as we sat here and thought about what competitively we needed to do both from a technology side and from a people side, we had to figure out a way to kind of make it self-funded. And so we definitely had to reprioritize what we were going to do and what type of people we were going to have throughout the support operation as well. So a combination of all those factors led to the discussion.

Yes. And as we started going a bit more on our digital journey, some things didn't make sense to us as well.

Okay. It sounds like you must have some medium- to long-term profit goals associated with that. Do you have margin goals or targets for improving returns that you could share with us?

Not specific targets that we're sharing at this time. No.

Okay. How should we think about consultant productivity at this point? Because, I think, you hit $1.7 million in annualized revenue. How do you think about the flack you have to be able to drive that even higher?

Yes. We hit $1.7 million in the fourth quarter. I think, we hit about $1.6 million in annualized. Look, I think, there's a little bit of room on top of that. As we've been talking to you about our hiring model, our hiring model has changed and our staffing model has changed as well. We have more Principals than Partners in the Executive Search model. So driving it simply through partner hiring is going to take a little bit longer. So I think there's a little bit more headroom on top of that, but I expect it to probably creep a little bit slower than it has in the past. We'll get to more productivity gains though through the system with how we leverage technology and support resources.

Okay. What are you seeing in terms of executive compensation inflation sort of aside from the accounting change of upticks? I'm curious if you could provide some more color on the nature of the higher upticks and how that compares to kind of recent experience in upticks?

Yes. Sure. I'm not sure that anything that I would say there in the nature of the uptick was necessarily related to recent changes in compensation. I think it's more aligned with our overall strategy to continue to work at the top. And so we're seeing a larger share of our work at the top. Our retainers are holding up. They've improved gradually as well. So I don't think it's necessarily due to executive compensation changes. We did have aggressive growth in our Financial Services industry group, which drives some of our uptick volume, obviously, more than other sectors do. So that could be a leading part of it. But I don't think it's necessarily how compensation is working in the industry.

Okay. And then, 2 numbers question and I'll get back in the queue. Is net spendable cash after the severance and bonuses, are we talking somewhere around mid-30s million? And do you have a currency assumption for at least major currencies associated with your guidance in 1Q?

Yes. I think, for our guidance in 1Q, I don't think we have a major gyration in currencies reflected in that guidance. I mean, we obviously have been watching over the first 2 months. But I don't think anything that we've said is just going to be dramatically different relative to the guidance on the currency standpoint. In terms of spendable cash, we're probably more likely in the $40 million range. I think, by the time -- because remember, as we pay out the bonuses in the first quarter, we're getting first cash operating flow coming in, and we've always kind of said that we need that $40 million-plus number to kind of run the business. You may recall that in the first quarter in the last few years, and the same will be -- it will be the same again this year, we'll borrow slightly on our working capital line just to get through the first quarter and that debt will be gone early in the second quarter.

(Operator Instructions) And we'll go to Kevin Steinke with Barrington Research.

So you mentioned that you think the restructuring actions can help drive sustained improvement in operating margins. And just wondering if you can talk a little bit more about how you translate those actions into more than just a one-time cost takeout. And obviously, growth is going to help drive margin expansion, but how does this plan feed your ability to improve margins over the long term on a sustainable basis?

Let me give you an example on multi-factor technology here for a second. So in Search, as we referenced, we've moved to a new assessment model, we've trained everybody globally, we're wrapping it with some technology as well, which allow us to standardize the search assessment model and, therefore, be able to drive margin improvement through standardization. So there's someplace where we're investing our capital to be able to drive margin improvement as an example, which I think will be quite sustained as well.

Okay. Makes sense. So it sounds like hiring plans for Heidrick Consulting are still a little bit fluid. I mean, how would you characterize how the timing and the pace that you kind of referred to it earlier, but do you have specific plans in place? I mean, obviously, I guess, it would be dependent on the availability of talent, but just how firm are the hiring plans right now in Heidrick Consulting?

Yes. Look, we need to grow Heidrick Consulting. So we are in the process of recruiting and we'll be in that process for a little bit of time to be able to build the organization. The priority for the organization is to come together to create some market success with some joint offerings to be able to lean on the enterprise and be able to collaborate and create some enterprise accounts as well, which will create a platform, I think, for further investment in people, in technology and the ability to hire. So hiring is definitely on our plans for Heidrick Consulting.

Okay. And just another question about the restructuring with the reduction in support expenses, some G&A expenses. Does that affect in any way how consultants operate on a daily basis? And how much are they impacted and how might they have to adapt, if at all, with the kind of change in support structure?

Yes, Kevin, this is Rich. I don't think there's a material change relative to the support side. Look, everyone gets comfortable with what they have around them at any one point in time. And I think, Krishnan made an important point about the challenge of keeping our cost in focus and making sure that we build it as part of our culture. Our fourth quarter results, for example, even reflect, pre-restructuring, a pretty dramatic decrease in G&A expense year-over-year. So it's not a topic that's forgotten around here and has been a consistent challenge for us because we do need to fund -- find ways to fund both our growth in terms of our people as well as the technology, and to the example that Krishnan gave. So at the end of the day, everyone knows they have to adapt, everyone knows they have to change. And sometimes, it's painful and we said goodbye to a lot of good people that spent a lot of number of years with the firm in that process. And those decisions are always hard. But at the end of the day, we needed to move forward into a new direction and that's what we did.

Okay. And just lastly, can you talk about the decision to create a Chief Operating Officer role and how that fits into your plans going forward?

Yes. So we have a Chief Operating Officer role that is multifaceted for us. It's primarily looking at search but also has taken on a couple of large functional capabilities as well with IT and marketing. And the objective there is to bring those closer to the field. And we really want to align IT and marketing much closer to our field, which is another thing that -- another example we could have used to kind of talk a little bit about, in fact, rather than taking something away from the field, how we're going to be helping the field on go-to-market initiatives, et cetera, things like that. So that's what we've sort of done with that role and given that role licensed to be able to help drive additional productivity in the field.

And with no additional questions on the queue, I'll turn the floor back over to our CEO for any additional or closing remarks.

Great. Thank you very much. Let me close by offering a few summary thoughts.

2017 was a year of significant change for our firm, leadership transitions, forming a new team, creating a new consulting organization, strategic restructuring, just to name a few. A big thank you to our outstanding team who stayed focused on clients and the market to deliver strong operating results.

We are reinventing Search in creating a new Leadership Advisory capability here at Heidrick. We continue to invest in people and technology. We have an accountable mindset on the bottom line. Our new team is very excited about 2018 and our future. You will see Heidrick in the market.

Thank you very much for joining our call.

Thank you. Ladies and gentlemen, that does conclude today's conference. Thank you all again for your participation. You may now disconnect.