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Operator
Ladies and gentlemen, good morning.
Thank you for standing by and welcome to the Korn/Ferry International conference call.
At this time, all participants are in a listen-only mode.
Later we will conduct a question-and-answer session.
Instructions will be given at that time. (OPERATOR INSTRUCTIONS) As a reminder, this conference call is being recorded.
Before I turn the call over to your host, Mr. Paul C. Reilly, Chairman and CEO, let me first read a cautionary statement to investors.
Certain matters to be discussed during this conference call will constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, the Company can give no assurance that such expectations will be attained.
Participants on this call are cautioned to consider the risks limited to the assumptions and expectations and not to place undue reliance on such forward-looking statements.
With that, I will turn the call over to Mr. Reilly.
Paul Reilly - Chairman, CEO
Great.
Good morning and thank you for joining us.
This morning, I'm going to share some highlights from our second quarter of our fiscal year, which ended October 31.
I'll also provide input on some of our strategic initiatives occurring in our business.
And then I am going to turn the call over to our Chief Operating Officer and Chief Financial Officer, Gary Burnison, who will provide more details on the financials.
I am pleased to report that we are experiencing continued growth in all regions across all markets and in all product lines.
The growth is coming not only from the number of engagements, but in our average fees as well.
On a year-over-year basis, our revenue increased 42 percent this quarter as it did in Quarter 1.
While the global economy is temporarily slowed by the impending Presidential elections (indiscernible) United States, we were able to surpass our financial targets in the second quarter.
Many of our global sectors and functional practices were up during the period, led by exceedingly strong results from our life sciences, consumer and industrial market sectors.
Within the life sciences space, business continued to improve, increasing 26 percent in the quarter.
Biotechnology and pharmaceuticals drove this sector, and from a regional perspective, North America posted a 29 percent and 55 percent from Europe.
Quarter-over-quarter, our consumer business was up by 6 percent, led by fashion, retail and consumer products.
Demand for our industrial services was primarily driven in North America this quarter, which posted an 8 percent improvement over last quarter.
Not only are we seeing a rise in demand from a sector and regional perspective, but also from a functional perspective.
The production of our Centers of Expertise, which we call COEs, which are comprised of dedicated groups of consultants who work with clients in various specialized functional engagements, is up dramatically year-over-year.
These specialties include our Board, CEO, CFO, CIO, HR, legal and other specialties.
Our Chief information Officer's COE is up 84 percent, placing technology and information officers in the first two quarters of this year as compared to the first two quarters of last year.
It is obvious the companies that have shelved their long-term IT developments during the downturn and relied on good-enough technology are now strengthening their IT departments at the highest levels.
Additionally, our Chief Operating Officer engagements are up 34 percent and our CFO searches 20 percent, no doubt driven by the increasing demand for ongoing financial compliance stemming from Sarbanes-Oxley.
While our CEO and Board engagements, which were growing dramatically, have flattened out somewhat, we are now witnessing the trickle-down effect, as organizations are beefing up their senior management and professional ranks.
In talking with clients worldwide, one of the interesting trends is evident -- organizations have moved beyond replacement hiring.
More and more, the executives and professionals we are placing are additive hires, individuals being brought on board to address strategic priority and growth initiatives.
Not only is our organization expansion deriving growth for our executive search and Futurestep businesses, we are also seeing marked improvement from our leadership development solutions group as well.
For the first six months of the year, revenue at Futurestep, our middle management division, is up 59 percent from the same period last year.
Futurestep continues to secure and execute more project-based recruitment engagements and fully outsource managed services projects.
Increasingly, clients are turning to us as an outsource partner to help them meet their ongoing recruiting needs.
Accordingly, we expect Futurestep to remain an integral part of our overall growth strategy.
Our leadership development solutions business is up an impressive 46 percent year-over-year, driven by North America and Europe.
As the global economy continues to expand, organizations are devoting additional resources to professional development of their employees.
Recruiting remains a strong focus for us at Korn/Ferry.
So far this fiscal year, we have recruited 28 new consultants and we are up a net additional six consultants this quarter.
This brings our consultant headcount to 398 at the close of the quarter.
We are pleased that our recruitment strategy is bearing out.
Based on our performance and review of public information of our competitors, it is clear that Korn/Ferry has retaken the number one position globally as the world's largest executive recruitment firm.
While the number one position is not the ultimate factor that clients base their decisions on when choosing a search firm, it is nonetheless an important achievement for us in terms of our internal morale, industry prominence, recruiting and brand recognition.
Moreover, it is a validation of our long-term strategy, as well as a vindication of the difficult decisions that we made during the economic (technical difficulty).
This is further enhanced by our continued improvement in client satisfaction scores in all products and all services -- great work focused on solving client issue leads to growth and profitability.
While we do expect to see some natural seasonality at this time of year as we move into the third quarter, we remain encouraged by continued demand for human capital services around the globe and are confident that we are following the right strategy.
With that, I would like to turn it over to Gary Burnison, our Chief Operating Officer and CFO, at this time.
Gary?
Gary Burnison - CFO, COO
Thanks, Paul, and good morning everyone.
The second quarter marks our fifth consecutive quarter of revenue growth and clearly solidifies our position as the largest executive recruiting firm in the world.
I am pleased to report that revenue increased 42 percent in the quarter; but more importantly, operating income tripled over the prior year.
Second-quarter EPS improved to 21 cents and is 3.5 times greater than the second quarter of last year.
Additionally, our cash balance grew to $122 million.
Fee revenue was 108.5 million, almost 112 with Mexico, and grew 5.7 million sequentially and nearly 42 percent versus the second quarter of FY '04.
Our operating margin reached 14.3 percent.
Now let me review the business segments in detail.
Second-quarter executive recruiting fee revenue grew 4.5 million, or nearly 5 percent sequentially.
The growth was primarily driven by the North American, Asia-Pacific and our Latin American regions.
North America fee revenue grew $4 million, or 7.7 percent, versus the first quarter, as the number of assignments and the average fee per assignment grew in the quarter.
The Asia-Pacific region continued its strong performance, as fee revenue grew $1 million sequentially, driven primarily by greater China, which is on pace to nearly double in size in FY '05.
Latin America grew nearly 400,000, or 19 percent, versus the first quarter, driven by growth in Brazil.
Executive recruiting operating earnings increased nearly $200,000 sequentially to 19.3 million, or a 20.2 percent margin.
Overall additions to the expense base related to hiring activity over the last two quarters, as well as worldwide partners meeting held in October, tempered margins in the quarter.
Operating earnings did improve nearly 900,000 in the Asia-Pacific region, driven primarily by a stable cost base and strong revenue growth.
As stated earlier, we are continuing to recruit talented professionals into the firm.
The number of executive recruiting consultants at the end of the second quarter was 398 versus 392 at the end of the first quarter.
Consultant productivity also continues to improve and is now at an annualized run rate of 970,000 per consultant.
Now turning to Futurestep, which had an impressive quarter.
Fee revenue reached 12.9 million in the quarter and is up 1.2 million, or 10.5 percent, sequentially, and 5.5 million, or 73 percent, versus the prior year.
All regional Futurestep markets contributed to growth in the quarter.
More importantly, the operating earnings continue to improve, growing 470,000 sequentially to 2.4 million, or an 18.4 percent operating margin.
Let me now comment on our third-quarter outlook.
Due mainly to seasonality associated with the year-end holidays, Quarter 3 fee revenue will likely be in the range of 100 to 108 million, and EPS will likely range from 16 to 21 cents per share.
That concludes our remarks and I will now turn it over to the operator so we can begin taking your questions.
Operator
(OPERATOR INSTRUCTIONS) Michel Morin from Merrill Lynch.
Michel Morin - Analyst
A couple of questions, if I may.
First on the use of cash, I'm wondering if you could comment a bit on any plans you might have to redeploy those $122 million.
Secondly, the tax rate seems to have creeped up a bit.
I'm wondering if you can update us a bit in terms of what you are expecting the tax rate to be for the rest of the year.
On the new hires, I'm wondering if you can give us a bit of color on the kind of people that you have been hiring.
Thanks.
Gary Burnison - CFO, COO
In terms of the cash, and obviously there are three things you can do with it -- repurchase stock, dividend or use it in the business.
And our plan right now is to use it in the business.
We are going to carefully grow our non-search services.
We want to grow that to 25 percent of our business in three years, and we will continue to recruit talented people into this firm as well.
In terms of the tax rate, it is about 37 percent or so, and that is probably what I would use for the next quarter.
Paul Reilly - Chairman, CEO
In terms of recruitment, we have had almost 90 partners here in the last two years that have joined us.
And part of it is what we are looking for talented people.
Some have come from our competitors and some have gone from industry, but they are people that fit areas where we think we need to have depth and can add significantly to our business under the strategy of a multiproduct strategy.
So we continue to focus on recruiting people to fill those holes and we will continue to do that, but it's a high hurdle to come into the organization too.
We have, I think, a very good, competitive market here and we need to get (ph) some top-quality people, so there's a high hurdle to bring folks in.
And so far, we've been doing a good job of that, but we expect to keep the standard up.
Michel Morin - Analyst
Thanks.
If I may, just quickly on that last point, are you finding that you're having some success attracting any of the folks from Whitehead Mann in Europe?
Paul Reilly - Chairman, CEO
We are not going to comment on any particular firm or any particular target.
Our recruiting has been pretty broadbased, and we are not targeting really anyone in our recruiting.
We are looking at our needs internally and like any good search firm, we look across the markets and try to fill those holes.
Michel Morin - Analyst
Great, thank you very much.
Operator
Kelly Flynn from UBS.
Unidentified Speaker
This is Andrew (indiscernible) for Kelly.
As a follow-up to the last question, the 19 net hires since the beginning of the year, could you update us on what regions those people have been added to?
Paul Reilly - Chairman, CEO
First, the number net this year is 28 net this year.
Not net.
I'm sorry -- you have 28 total hires this -- the almost 90 is over two years.
The regions have been pretty broad.
Most of those this fiscal year have been more in Europe.
Last year were Europe and the U.S., probably more in the U.S., and we have added a few to Asia.
In Asia, we have a pretty dominant market position, but we have continued to look to add consultants in the particular markets.
But we are pretty much looking, again, across the board to fill holes, but they have been mainly focused in the U.S. last year and probably more so in Europe this year.
Unidentified Speaker
Okay, thanks.
Can you tell us what the bonus accrual was for Q2?
Gary Burnison - CFO, COO
The bonus accrual was a little over $20 million.
Unidentified Speaker
Okay.
Can you tell us approximately what the partners meeting in October cost?
Gary Burnison - CFO, COO
That is something that I haven't disclosed, and I really don't want to, for obvious reasons.
I will tell you that it was seven figures.
Unidentified Speaker
Okay.
I noticed that the average fee per search increased quite dramatically in Q2.
You mentioned that CEO searches have been about flat and that you have seen a big pickup in CFO and COO searches.
Has that been what's driven the increase in the fee per search?
Paul Reilly - Chairman, CEO
I think what you are seeing is our CEO and Board practice is robust.
It was growing at 30 percent compounded, even during the downturn.
And it hasn't gone down, but we are not getting those kind of growth rates, I think, as that part of the business has flattened out from a growth standpoint.
So we are growing, but not at the same rates.
I think what you are seeing across the board are very high-level positions at that next level of management being replaced in a much more competitive market.
And it is driving fees up.
Unidentified Speaker
Okay, thanks a lot.
Operator
Randy Mehl from Robert W. Baird.
Randy Mehl - Analyst
Congratulations, Paul and Gary.
Great results here.
I wanted to just pursue a couple items.
First, Futurestep, obviously very strong.
What was the source of that strength when you look across positions and maybe industries?
Paul Reilly - Chairman, CEO
I think if you look at really the strength -- and it is probably a little more functional than that -- the strength is that we have really built an outsourcing business; that the business is transformed from single-search transactions to multiple-search project solutions -- you know, someone needs 50 of these or 100 of these -- and we are able to bring in a global solution.
And a growing amount of our business is actually an outsourcing, where we have people on staff full-time running the processes (ph) for a company as well as their recruitment.
So the shift in the growth has been in a strategy where I think there is a hole and a niche, and it is nothing knew.
We have spent a few years getting ready for this and developing the expertise and the resources, and now you are seeing the fruition of a couple of years of labor.
And I think you are going to continue to see it for a while.
Randy Mehl - Analyst
Right.
I understand that.
If you look at where some of these larger projects are happening, is there any pattern to the source of that new business or is that just pretty much across the board?
Paul Reilly - Chairman, CEO
No, it's been pretty much across the board.
It is a functional expertise that we're able -- the outsourcing business and process that we have developed under great leadership from Bob McNabb and his team, and bringing our industry expertise into the industry.
But it has been pretty broadbased.
You can't say one industry is driving it.
Randy Mehl - Analyst
Okay.
You have had -- I think in the past, you have said operating margins 18 percent is possible.
Maybe you could just update us on whether you still view that as the case and some sort of time parameters around that.
Gary Burnison - CFO, COO
Well, Randy, I fully believe that a well-run services business should, in the very best of times, should return 18 percent operating margin.
That is still what we have as a strategic goal for this firm, and we are going to continue to drive for that.
Paul Reilly - Chairman, CEO
And you know, margins are growing in every region and every product.
And I think if we were to sit back at the beginning of the year and tell you we were going to hit these margins, people would say, well, wow, that is aggressive.
But we are hitting them and we plan to keep growing the margins.
And there is still room to do that.
Obviously, as you close, the closer you close in on 18 percent, the tougher you have to manage to get there.
Randy Mehl - Analyst
Thank you very much.
I appreciate it.
Operator
Toby Summer (ph) from SunTrust Robinson Humphrey.
Toby Summer - Analyst
Just wanted to revisit a couple of the prior questions.
Regarding uses of cash, you have a certain amount of cash on the balance sheet.
But I was wondering what your comfortable cushion is that you want to maintain on the balance sheet.
And then maybe if you could discuss the growth and the leadership development and maybe give a little bit more color there.
Thanks.
Gary Burnison - CFO, COO
I think in terms of cash, you first of all need to be conscious of the fact that there are, like any services business, there is fairly significant performance-related awards that are made after year-end.
And if you factor those out, you are going to have a net cash position.
A services business is probably one that doesn't lend itself to a lot of debt.
But if you look at that and you look at our operations globally, I would feel comparable with about $60 million or so of cash on the balance sheet.
And again, that is after netting out bonuses.
And beyond that, we are obviously going to continue to be very opportunistic and strategic in terms of growing the non-search part of our business.
And our plan right now is to use that cash in that manner and redeploy it in the business.
Paul Reilly - Chairman, CEO
I'm sorry -- what was the other part of your question?
Toby Summer - Analyst
If you could give a little bit more color on the leadership development growth.
I think you mentioned sort of mid-40 percent growth in North American and Europe being the main drivers.
Could you give us a little bit more color on what is driving that and what your goals are in terms of growing that?
Paul Reilly - Chairman, CEO
We have taken a very broad-based approach to our leadership development solutions.
It is our assessment and coaching businesses primarily.
But I think where we are different than other firms is we have created a common methodology and platform across all of our businesses.
So we have an assessment tool that our search people use in search assessments; our assessment people do it in leadership development; and our coaching people are all on the same platform.
So we have the ability to really have an integrated approach to our client on assessing our candidates for search and for assessing top management.
So what we are seeing really is a more integrated go-to-market strategy, where we are delivering multiple products to the same clients.
And our consultants and executive search and leadership development services and Futurestep understand the other products and services, and you're seeing -- that is I think you are seeing a launch into the market.
Demand is also increasing.
I think that assessment is a mature business in Europe.
It has been around for a while.
It is a growing business here in the U.S. and in Asia, where it is a more relatively new product.
So the competition and the positioning of the products are different in the regions.
But we see strong demand, I would say, in Europe.
A lot of it is market share with the new product.
In America, it's actually -- in the U.S. -- in Canada it is probably more of an emerging business that is newer to the market and growing very quickly.
Toby Summer - Analyst
If I may, do you anticipate the leadership development solutions approaching a mass and a level at which you would want to break it out?
And then second of all, a follow-up in terms of investing the cash in the business.
Could give us a sense for what the distribution of that investment may be in terms of either infrastructure, new offices, or is it mostly people expense?
Paul Reilly - Chairman, CEO
I would say at first, if you look at all of our businesses, first (ph), they have been cash positive.
Futurestep and leadership development services have grown growing (ph) off cash.
So our investments have been in technology and some of our platforms and the hiring of people.
We have not had mass dollar investments.
We have created the products over a number of years now and really just getting the fruition of rolling them out.
We see the investments continue to be some upgrading of our technology, some people.
And if we find some strategic choices for niche acquisitions that fit in, we would look at them.
But we're taking a very, very cautious market growth.
And basically, when you have organic growth of 40 percent at these margins, you have to keep focusing on that organic growth and looking at growth that makes sense.
That is going to continue to be our strategy.
Toby Summer - Analyst
Thank you very much.
Congratulations on the good quarter.
Operator
Mark Marcon from Wachovia Securities.
Mark Marcon - Analyst
Congratulations, Paul and Gary.
First of all, just a follow-up to Randy's question, with regards to the long-term operating margin target.
Does that include the expensing of options or not?
Gary Burnison - CFO, COO
No, that does not, Mark.
That will obviously have some impact.
As you know, we have clearly reduced the level of options, and we have used a more rifle (ph) approach in terms of distributing those throughout the organization.
But that does not include the option expense.
Mark Marcon - Analyst
With regards to Futurestep, obviously Bob and the team have done a great job there in terms of growing things.
The margins are expanding beautifully.
Where could those margins go to?
Gary Burnison - CFO, COO
The second quarter was just a phenomenal quarter.
I realistically would be hard pressed to believe that there is a lot of upside to those margins.
The team that we have at Futurestep is world-class, and I would like to challenge them to beat those margins.
But realistically, those are healthy margins.
Paul Reilly - Chairman, CEO
Mark, what I think you are going to see is even when we targeted to roll out this business, they are already at margins that exceed some of the targets we had first set out.
So they are running a great business.
And I think right now our focus is growth, not increasing the margin -- and keeping the quality.
One of the things that people don't understand, when that business was launched many years ago, there were some quality issues four or five years ago, before Bob got here.
Today, we have a client satisfaction that every group -- an outside group that follows up on every transaction we do -- search, Futurestep, leadership development services -- the interesting thing is we have set a very high benchmark.
Our scores in executive search have been improving and they are right next to world-class.
We keep challenging our people to move them up.
Futurestep has had the same quality rating as executive search.
So their execution has been great, And our leadership development service ratings are off the chart.
They almost say we're not charging enough because the clients are way too happy.
So we are going to keep focusing Futurestep to keep the quality level up to hold the margins, but we really want that to be a revenue, market share or growth business.
We're not really going to be pushing them for the final pennies.
Mark Marcon - Analyst
Any targets in terms of number of consultants by the end of the year?
I know you're much more focused in terms of the quality and bringing in the right people.
But generally speaking, any way we should think about it?
Gary Burnison - CFO, COO
You are right.
You have hit it on the head.
That is absolutely what we are focused in on, is quality and culture.
And it can help move us along, like we have done.
We are going to continue -- there will be some turnover and the like.
We don't target numbers per se.
I wouldn't be surprised if you look out at April 30 on a net basis and see we are up 5 to 10, but it is not going to be astronomical.
Mark Marcon - Analyst
In terms of leadership development services, you mentioned a three-year target of getting out to 25 percent.
Is there any way that you can give us some sort of a feel for how much of that would be organic versus through acquisitions.
And I may have missed it, but I didn't hear where we were right now or where we might be a year and a half from now.
Paul Reilly - Chairman, CEO
We have had a goal, and we talked about non-core search, (multiple speakers) we include Futurestep and leadership development solutions.
Mark Marcon - Analyst
Oh, so Futurestep is in there?
Paul Reilly - Chairman, CEO
Yes.
And frankly, we are way over-paced to exceed that goal at this run rate.
Now, we will have to see what happens.
But even with executive search growing strongly, our percentage of the business and the other businesses is growing.
And again, we will look at niche acquisitions that make sense to fill client solutions, not to generate revenue.
Right now, we're doing a great job of organic growth; that will be our focus.
And if we find some things that add to that portfolio or can help us in our overall strategic direction of creating a portfolio of products that solve client issues versus transactions, we will look at them.
But I think you are going to see a lot of this going from organic growth.
Mark Marcon - Analyst
Paul, you mentioned Sarb-Ox in your early commentary.
Can you give us a feel for how much that is contributing and how you would expect that to play out once 404 compliance deadlines are met?
Paul Reilly - Chairman, CEO
I think what you are seeing is a big -- if you look at risk officers are up 40 percent; if you look at CFOs, they are up 20 some percent.
But that is not a big overall share of the business.
There is always the next niche that comes up.
So it is not like it is a 20 percent business segment that is up 40 percent and it is going to cool down.
It's hot right now.
I think that trend will continue.
But as that trend slows down, the next trend will be there, and I wouldn't set it out.
If you look at those numbers, you can see that SOX has driven some of those sectors.
Mark Marcon - Analyst
Terrific.
Thank you very much.
Congratulations again.
Operator
Ty Govatos from C. L. King.
Ty Govatos - Analyst
Congratulations on a great quarter.
More of a theoretical question.
When I talk to some of the search companies, some public, some private mostly, let's say the 8th, 10th, or 15th largest, I'm hearing more and more that the top three or four people in the business seem to have an advantage of scale, which was never true before.
Do you agree with that assessment, and if so, what would you attribute that scale advantage to all of a sudden?
Paul Reilly - Chairman, CEO
I think that there's a couple.
Now I came over to this business from a $13 billion business, and believe that there is an advantage to scale.
That is two things.
One is you look at business -- and everybody talks about global accountants and regional accounts, and they are very important.
But the truth is very good companies that strive to make that 20, 25 percent of their business.
And what does, to compete in that arena, you have to be global and you have to have scale, because those people want global solutions.
But also competing in that arena makes you a premium provider that allows you to be a premium deliverer for some regional businesses.
So one advantage of scale is both positioning and global delivery.
The second is the infrastructure.
This is a business where technology and knowledge management, people knowledge being shared has a huge advantage.
If you are a boutique and have 5 to 10 people and you are an office (ph), you can have a meeting (ph) and share that.
If you are global organization, you have to have those systems in place.
So it makes it very hard for a midsize company to develop those sharing and knowledge and management mechanisms because they have the cost without the benefits.
Or they can develop the cost and it's too big of a percent of their overhead.
So I believe, just as investment banking, you've seen a huge consolidation over 20 years; in accounting, consulting, you have seen the huge consolidation and you have the big players and the bouquets, over time, that will happen to this industry too.
And that is an industry trend that we are not creating and search (indiscernible) every business in the world.
Ty Govatos - Analyst
Okay, thanks an awful lot.
Again, great quarter.
Operator
Jamie (indiscernible) from (indiscernible) Partners.
Unidentified Speaker
My questions has actually been asked, but congratulations on the quarter.
Operator
Toby Summer from SunTrust Robinson.
Toby Summer - Analyst
Just wanted to follow up on that last question about scale and see if you can give us some color.
Are you seeing growth in sort of key accounts that you are deriving a pretty large piece of revenue from?
And maybe if you could comment to what extent that your project-based work at Futurestep is giving you better inroads into those key accounts because of the ongoing presence and more touch that you may have with the client.
Paul Reilly - Chairman, CEO
I think we're actually -- in this industry, we are in a transition that most industries have started going through 20 years ago in the service space.
We look at companies that have used executive search and have had hundreds of providers saying we need one or two or three partners that really understand our business that can deliver.
You are seeing people -- you are seeing the beginning -- for Futurestep, the beginning of a trend of really outsourcing staffing.
Just like it was slow when technology first started being outsourced and maybe the CFOs were kind of reticent.
And they started letting go and the trend happened; it became commonplace.
In the finance function, the back room has been outsourced the same way.
So our CIOs in technology, CFOs in finance, you are at the same beginning stage in HR where people are looking at outsourcing staffing and recruiting, and it is just starting to happen.
So I think we are at the beginning of a megatrend for companies, as they have in most of the functions of their business, saying are there other world-class providers that can do this for us, because it is not our core competency and it's not our business.
We're very early in that, but we are obviously seeing great growth in our global accounts and our big outsourcing projects.
And it is an early trend for this industry and our focus three years ago when we got here was start to creating (ph) the infrastructure to be able to be a leader in that.
And time will play out.
So it's early days.
We see the trend increasing.
We hear the talk more increasing, and I think it is going to be a robust market going forward.
Toby Summer - Analyst
Thank you.
Operator
Mark Marcon from Wachovia Securities.
Mark Marcon - Analyst
The last couple of quarters, you have had some pretty nice growth in Europe and Asia.
The economic news out of those regions hasn't been as suggestive of tremendous growth, outside of China.
I was wondering if you could comment in terms of what you are seeing.
I know that you have improved your teams pretty materially, particularly in Europe, but can you tell us a little bit about what is going on there and what the expectations are in those two major regions?
Paul Reilly - Chairman, CEO
I think the world is a big place (indiscernible) and I have to go place-by-place.
But definitely on continental Europe, I think it has been market share as we have recruited good people to add to our existing teams and to change the profile in certain countries.
And I would say on the continent, it is clearly our market share gain.
UK, I think it is both market share and just an improving economy, like here.
Asia generally -- you know, it's like a year ago, when we were telling people the economy was getting better but I don't think anyone believed it, and we could see it in our numbers -- I think you are seeing the same thing in Asia.
So actually, it is pretty broadbased.
But we have spent a lot of time and focus in the last two years setting up in India and China.
And I'll tell you, especially in China, where we continue to invest, we've opened up Futuresteps there, we are continuing to do some investments there and we have been there for 10 years, we are starting to see the payoff of that.
But every country -- Japan has improved, which has been a no-growth economy for 10 years and we see it in our business.
Mainland Asia.
Australia has been a tremendously solid market for us even through this downturn and continues to do well.
But a lot of the growth is really China-driven.
And we expect it will continue to be and we will expect to continue to investment there.
In fact, if you looked at the run rate of our Asian business, Mark, it's about the same size as it was at the peak of the dot-com era today.
Mark Marcon - Analyst
I've noticed.
How big is China now?
Gary Burnison - CFO, COO
Well, you know, I would say that greater China and throw in India, that is a $20 million a year business or so, Mark.
Mark Marcon - Analyst
Great, thank you very much.
Operator
(OPERATOR INSTRUCTIONS) No questions.
Thank you.
Please continue.
Paul Reilly - Chairman, CEO
Great.
I would like to thank you all for joining the call and I think it is nice to have a good quarter behind us.
But we just finished our Global Operating Committee and Board meeting, and the message at both meetings was very clear -- hey, great job, great work, but we are here to drive a long-term strategy and we have to keep putting the elements in place for the future.
So we are very focused on the business and the last couple of quarters I think are showing that the strategy is paying off, but we still have to prove it to you and everyone else.
So we're very, very focused on going the next step.
Thank you for joining the call and look forward to talking to you next quarter.
Operator
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