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Operator
Ladies and gentlemen, 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.
As a reminder, today's conference is being recorded.
Before I turn the call over to your host, Mr.
Gary Burnison, please let me read a cautionary statement to investors.
Certain statements may be made in the presentation today that 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, investors are cautioned not to place undue reliance on such statements.
Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties which are beyond the Company's control.
Additional information concerning such risks and uncertainties can be found in the Company's annual report for fiscal 2007.
With that, I'll turn the call over to Mr.
Burnison.
Please go ahead.
Gary Burnison - CEO
Thank you, Ryan.
Good morning, and thank you all for joining us.
I'm going to divide my remarks this morning in to three sections.
First, our first quarter performance; next, our strategy; and finally, our outlook.
Today, as we report on our first quarter of FY '08 and based on our performance over the last 16 quarters, it's clear our strategy has remained on pace with the global talent management needs of our clients.
Fee revenue for the quarter reached a new high, totaling over 185 million, a 21% improvement from the prior year.
EPS also set a new record, at $0.36 per share, up 16% year-over-year.
The business was lead by strong performance across all of our business lines.
Executive Search, a 26% increase in Futurestep, our outsourced recruiting subsidiary, as well as a growing leadership development business.
While all Executive Search regions posted gains in the first quarter, EMEA performed exceedingly well, generating 44.7 million in fee revenue, up 31%.
Germany, France, and Austria turned in strong sequential performances, boosting results for the region.
Asia-Pacific had another great quarter, with a top-line increase of 24%.
China and India continue to be the dominant market drivers in the region.
We're also pleased to report that Japan had a very good quarter, generating solid sequential improvement.
From a markets perspective during the quarter, life science and our consumer markets lead the way, each up 16% sequentially, driven by an improvement in all regions, while our technology and industrial businesses were up 7% and 1% respectively.
I point out that our technology business was up 59% year on year.
Our financial service business was down 2% sequentially.
Our consolidated leadership development business, which includes Lominger and Leader Source reached almost $13 million in fee revenue for the quarter.
Looking ahead, our strategy remains steadfast.
Acute skills shortages, unprecedented population swings, global competition, and the rapid emergence of a global labor pool have created heightened demand on the management of the world's most precious commodity, namely, people.
It is no longer enough simply to identify and attract the best talent.
World class organizations must now possess the skills to deploy, develop, retain, and reward their best performers, or risk losing the war for talent.
Our vision is to be the premier global provider of talent management solutions.
Our mission is to be regarded as the top in mind brand and human capital, known or unsurpassed quality, where the most talented people.com to work each day.
We want to transform this business and the industry, creating a firm that cannot only identify great talent for our clients, but help them more effectively and efficiently manage their work force.
In the quarters ahead we're going to concentrate on the very things that have created our recent success.
First, unparalleled reach and quality in Executive Search.
This year we plan to further institutionalize our go-to market strategy, infuse our proprietary intellectual property into our recruiting businesses to further differentiate as well as to provide uniformity and scale through an initiative we're calling the Korn/Ferry Advantage.
Furthermore we'll improve speed and efficiencies through the release of a new more robust technology platform.
Second, we will extend our brand through a new corporate identity rollout, which we ire calling the Art and Science of Talent.
And we'll extend our presence as an industry-thought leader, by publishing timely studies and reports through the launch of the Korn/Ferry Institute.
Next, we're going to continue and scale and grow Futurestep, our outsourcing recruitment subsidiary, as well as our growing leadership development businesses.
Fourth, we'll seek out, transformational opportunities along the broad HR spectrum to further differentiate Korn/Ferry, expand our capabilities and drive value for our clients and shareholders.
Finally, we're going to focus on our people.
We believe the continued recruitment and development of our work force, along with providing them with an enriching and rewarding environment which allows them to thrive professionally is critical to the long-term success of Korn/Ferry.
As the demands of our clients change, we must always innovate.
We will continue to upgrade our offerings.
Through our proprietary intellectual property and technologies, we will infuse science in to the art of search.
Not only will this differentiate Korn/Ferry, it will also build a bridge between our recruiting businesses and our other solutions.
Now as to our outlook.
Recently, we have all been reminded about the cyclicality and volatility of the world's financial markets.
And as a result, in the nearer term, our outlook is somewhat clouded, as the U.S.
economy is potentially impacted by a housing slump, and an uncertain credit market.
Ironically, demand for our offerings, as measured by new business in August, remains strong in both Asia-Pacific, and EMEA, while new business confirmations in North America were generally in line with our expectations with some softness in financial services.
The good news for Korn/Ferry however, is since 2001, we have made enormous strides in running our business efficiently and productively.
Today we have surpassed our record revenue level from 2001 by almost $100 million on a run-rate basis, but with one third less employees and 400,000 square feet less of office space.
Our balance sheet is rock solid.
With over $250 million in cash, this compares with only 27 million back in 2001.
And finally, we have a diversified business today from both a geographic and market perspective.
With over 45% of our business originating outside of North America across all business lines.
In the near term, especially in light of the changing climate around most businesses today, we will continue to manage our business pragmatically, and prudently.
But also with the long-term you to seize opportunity in any climate for the benefit of our clients, shareholders, and colleagues around the world.
With that, I would like to turn it over to our Vice President of Finance, Gregg Kvochak.
Gregg?
Gregg Kvochak - VP Finance
Good morning.
As Gary stated, Fiscal '08 first quarter consolidated fee revenue grew $32.6 million, or 21.3% versus the first quarter of fiscal '07 and nearly $5.7 million or 3.1% sequentially, reaching a new high of $185.4 million.
Korn/Ferry's consolidated fee revenue has now grown sequentially for 16 consecutive quarters, dating back to July of 2003.
This is the firm's longest sequential growth streak in the last 10 years.
Earnings have also grown substantially.
Fiscal '08 first quarter EPS grew $0.05, or over 16% versus the first quarter of fiscal '07, and $0.01 sequentially, reaching a record high of $0.36.
Additionally, consolidated fiscal '08 first quarter operating earnings grew over $4.8 million or 23% versus the first quarter of fiscal '07 and nearly $1.2 million or 5% sequentially to $25.1 million with consolidated operating margin improving 20 basis points both year-over-year and sequentially to 13.5%.
At quarter end, our worldwide cash balance was $245.3 million, down approximately $79 million sequentially, primarily due to payment of approximately $127 million of fiscal year-end -- fiscal year '07 performance bonuses in the quarter.
Through September 6th of fiscal '08 the firm has repurchased approximately 800,000 shares of stock with proceeds of approximately $19.5 million.
There is now approximately $30.5 million remaining of the $50 million of share repurchase funds authorized by the Board of Directors in March of 2007.
The number of executive search consultants at the end of the first quarter grew to 516.
The 26 consultant additions over the fourth quarter of fiscal '07 represents 16 internal promotions, and 10 net new hires.
First quarter annualized revenue per consultant was $1.2 million.
Now let me review the business segments in a little more detail starting with Executive Recruiting, where fiscal '08 first quarter fee revenue reached $159.8 million an increase of $27.4 million or 21% year-over-year and $2.6 million or 2% sequentially.
All executive recruiting operating regions achieved fee revenue growth in the first quarter of fiscal '07 versus -- while sequential fee revenue gains were achieved in all operating regions, except North America.
Fiscal '08 first quarter North America fee revenue was $87.3 million, up $11.8 million or 16% year-over-year, and down 4.1 million or 4.7% sequentially.
In North America, sequential fee revenue gains in the technology and life science markets, up 8% and 12% respectively, were offset by a 17.5% decline in the financial services market, and an 8% decline in the industrial market.
Fiscal '08 first quarter growth trends remain strong in Europe where fee revenue grew nearly 31% or $10.5 million versus the first quarter of fiscal '07, and 8.3% or $3.4 million sequentially to an all time high of $44.7 million.
Year-over-year 16 of 19 local country markets improved while sequential fee revenue gains were driven primarily by Germany, up 39%, France up 14% and Switzerland up 48%.
All major specialty markets improved sequentially in Europe, lead by consumer goods at 31%, industrial at 12%, and life sciences at 10%.
The Asia-Pacific region also continued its strong growth trend this any first quarter of fiscal '08, with fee revenue reaching another all-time high of $22.7 million.
Asia-Pacific's first quarter fee revenue was up 4.4 million or 24% year-over-year, and over $2.8 million or 14% sequentially.
Greater China, up 23% year-over-year, and 19% sequentially, India, up 38% year-over-year and 36% sequentially, and Japan, up 42% year-over-year and 40% sequentially, continue to be key growth markets for the Asia-Pacific region.
In Latin American, fiscal '08 first quarter fee revenue improved 13% year-over-year and nearly 15% sequentially to $5.1 million, primarily driven by growth in Brazil, Chile, and Columbia.
Consolidated fiscal '08 first quarter Executive Search operating earnings were $32.7 million, up nearly 6 million or 22% year-over-year, and up $1.4 million or 4.5% sequentially.
Consolidated Executive Search operating margin also improved to 20.5% in the quarter, up 30 basis points year-over-year and 60 basis points sequentially.
These profitability gains are primarily the result of increased consultant productivity.
Now turning to Futurestep.
Futurestep's fiscal '08 first quarter fee revenue improved over $5.2 million or 26% versus the first quarter of fiscal '07 and $3 million or 13.4% sequentially, reaching $25.6 million.
Futurestep has now grown in 15 consecutive quarters.
All regions achieved both year-over-year and sequential fee revenue gains.
Fiscal '08 first quarter sequential fee revenue growth was greatest in North America and Asia-Pacific at 19% and 12% respectively.
Futurestep's fiscal '08 first quarter operating earnings were $2.1 million an improvement of over $1 million or nearly 100% versus the first quarter of fiscal '07.
Operating margin also improved, reaching 8.1% and was up over 300 basis points versus the first quarter of fiscal '07.
Let me now comment on our fiscal '08 second quarter outlook.
Assuming constant foreign exchange rates and factoring in the effects of summer vacation seasonality on confirmation rates, we estimate that Quarter 2 fee revenue will likely range from $174 million to $185 million, and diluted earnings per share will likely range from $0.30 to $0.36.
That concludes managements remarks.
I will now turn it over to the operator, so we can begin taking your questions.
Operator
(OPERATOR INSTRUCTIONS) Our first question will come from the line of Elliott Pretcher with Merrill Lynch, please go ahead.
Elliot Pretcher - Analyst
Hi, good morning.
On the press release you mentioned some caution.
Can you tell us what you are seeing as far as the indicators that you are tracking, and what your clients are telling you?
Gary Burnison - CEO
Well, I'll try to do that, Elliott.
You know, what we're seeing is very similar to many of our clients, many of the CEOs that I have talked to, we're seeing continued strength in EMEA and Asia-Pacific.
In fact, in EMEA, in August, the level of new business was the highest level of new business in the firm's history.
And was as strong as any month this calendar year.
So in Asia-Pacific and EMEA continued strong, new business activity.
And in North America, it's uncertain.
You know, we -- we -- if you look at new business in August for North America, it was right in line with our expectations.
And so, you know, we are -- what we're picking up from your clients is -- is still, you know, strong demand for both our leadership development business as well as executive talent, and, again, there is probably some, you know, sense of caution in -- in terms of the nearer term outlook from what all of us read in the paper.
Elliot Pretcher - Analyst
Sure.
Thank you.
It looks like you continued to hire in the first quarter pretty consistent with hiring last year.
Can you -- can you maybe provide some color by region with regards to hiring?
Gary Burnison - CEO
Yes, we -- we typically don't -- don't break that out by region, Elliott.
I would say -- if you look at the consultant count, we ended the quarter with 516, it's a little bit misleading in there.
There's about 16 or so internal promotions.
And, you know, the life blood of a professional services business is continuing to bring in great talent, to deploy that talent, and develop our colleagues, and we're going to continue to do that, that's the life blood of the firm.
We have done that consistently over the last 17 quarters, and we're going to be very opportunistic in the nearer term when it comes to talent.
Elliot Pretcher - Analyst
Okay.
Thank you very much.
Operator
Our next question comes from the line of Andrew Phones with UBS, please go ahead.
Andrew Phones - Analyst
Yes, hi.
First, I was wondering if you could give us the size of the financial services business in the U.S.
as a percentage of your U.S.
revenue?
Gregg Kvochak - VP Finance
Yes, for the -- for the trailing four quarters, Andrew, it's about 19% of our executive search fee revenue.
Andrew Phones - Analyst
Okay.
Thanks.
And -- and -- you know, in terms of kind of the -- I think you saw a decline there, year-over-year, you know, what -- what drove that -- was it in some of the areas we might expect like mortgage?
Or was it in other areas?
Gary Burnison - CEO
Let me make sure again to clarify that, it's our financial services business.
You know, one of the things that we enjoy is a fairly broad and diversified portfolio, particularly compared to some of the -- some of the competitors.
Our financial services business overall is about 22% of our executive recruiting revenue, and within that, North America is about 19%.
So if you look at the financial services business, bigger presence in EMEA and Asia-Pacific and North America is about 19%.
In terms of your question around trends there, again, you know, I can remember back in '98 when I was in investment banking, and we had the debt crisis, you know, August is a tough time to read any kind of trends in to anybody's business because of the seasonality, and that's what we have as well.
With respect to investment banking, and capital markets, the late summer and fall is generally a time when those institutions are not making big hires just because of the amount of bonus and the like that would have to be taken out from the previous employer.
So historically, you know, you wouldn't find that to be a particularly strong time for investment banking and capital markets.
What we're sensing in the financial services marketplace as it relates to North America, which, again, is a relatively small part of our financial services business, is some caution in the capital markets area, and in the investment banking area.
And on the other side of the spectrum in insurance, operations, and infrastructure, real estate, we're continuing to see strong activity there.
Andrew Phones - Analyst
Okay.
Thanks.
That's really helpful.
And then, in terms of kind of Futurestep, I was wondering if you could kind of give us some sense of -- you know, the (inaudible) of the Futurestep revenues, while either by industry or, you know, geography.
Gary Burnison - CEO
If you look by -- I can't do it off the top of my head by industry, but by geography it's about 45% in EMEA.
It's probably about 40% or so in North America, and the balance is a very, very good business in Asia, and a very profitable Futurestep business for us in Asia.
Gregg Kvochak - VP Finance
Just to be a little more exact.
In the first quarter 9.3 million in North America, about $9.8 million coming from Europe, and about $6.5 million coming from the Asia-Pacific region.
Andrew Phones - Analyst
That's great.
Thanks, guys.
Operator
And our next question comes from the line of Tobey Sommer SunTrust, please go ahead.
Tobey Sommer - Analyst
Thanks.
Question for you about -- your prepared remarks talked about extending and used words that suggested investment, and given the kind of caution environment in North America, I was wondering if you could expand upon the degree to which you think investments may come Korn/Ferry's way near term.
Thanks.
Gary Burnison - CEO
Yes, well, I think we have got a proven track record.
The leadership team that's in place, Tobey, has been in place, for, you know, essentially five years.
We have got a track record of delivering to shareholders and to you everything that we have promised.
We have got a track record of growing the business profitably.
Long-term, we are very bullish on our strategy in what we're trying to create here.
We are going to create a world class HR services firm that cannot only help clients identify talent but help develop, retain and reward their work force.
But like any businessman that picks up the paper, we are going to be very prudent and cautious over the next few months, and -- you know, see what -- see how things unfold.
Again, I reiterate that if you look at the business, the level of new business in August, it was generally in line with our expectations, and EMEA and Asia-Pacific exceeded our expectations.
So we're just -- you know, we're trying to be prudent here and pragmatic, and looking out and saying that the near-term outlook is somewhat clouded.
We're going to continue to take share in a -- you know, in an up market or a down market, and I think that's what we have proven in the past, and -- and, you know, we want to seize opportunity in any kind of climate, and that's how we're going to run the business.
Tobey Sommer - Analyst
Question about hiring in North America, given the slightly more caution headlines, at least, I was wondering if you are hiring patterns in this kind of climate may be a little bit different whether you would skew towards internal promotions or hiring people with executive search experience, or industry experience.
Just curious if the market environment impacts your thought process in terms of the kinds of people you would hire in North America.
Gary Burnison - CEO
That's a good -- good question.
One of the reasons for our success, we have 516 partners today 2400 colleagues around the world.
Many of those folks are new to this organization over the last 42 months.
If you look at the partners, for example, say, a couple hundred new partners, 100 of those didn't have any executive recruiting experience, and our people generally, that have operating experience or consulting experience, and we believe that ultimately that brings the most value to our clients.
If you look out in the very, very short-term, and are myopic about it, you know, we will probably tend towards people that are proven and have experience in the executive recruiting business, but, again, longer term, this mix that you have seen us execute in terms of our hiring strategy over the last 42 months is something that we do believe in.
Tobey Sommer - Analyst
Okay.
In the -- just one kind of historical reference question and I'll get back in the queue.
Financial services about 22% of executive recruiting revenue over all at this point.
If you look back at the last economic slowdown, when tech was booming, what percentage of revenue was that at the time?
Gary Burnison - CEO
Technology?
Yes.
Gregg Kvochak - VP Finance
Yes, back kind of in 2000, 2001, tech got up as high as 25% of our overall fee revenue.
Gary Burnison - CEO
But I would also say -- I wasn't here then -- but I would also say there was a ton of venture capital activity, where business was just coming in the door, and our work force ballooned up to, you know, 3400 people or so.
So on top of those technology numbers are a lot of retail companies that were trying a dot-com strategy.
So in actuality, the number could have been substantially higher than that.
The times were completely different.
As we have gone back, when we first came in the business and looked at the 38-year history of Korn/Ferry and the four recessions or so, in three of those four recessions, the business was down between 8 and 9%.
Now, granted, the business was smaller.
It was a younger industry.
But I certainly wouldn't make analogy of today's environment to the dot-com era.
We just do not see that at all.
Tobey Sommer - Analyst
Thank you very much, very helpful.
Operator
And our next question comes from the line of Clinton Fendley with Davenport, please go ahead.
Clinton Fendley - Analyst
Thank you.
Good morning.
Gary, I wondered if you could remind us of how well you're diversified across your financial services offering, not on a regional basis, but by offering insurance, capital markets, commercial banking, et cetera.
Gary Burnison - CEO
Very diversified.
And again, with any large organization, commercial bank, investment banking, you know, the coding is always the trick, and so -- but, you know, in broad categories, if you look, insurance is almost 15% of our business.
Commercial -- well, banking overall, which includes operations and infrastructure, commercial banking, investment banking, is 37% of our business or so.
Consumer banking is 20% asset.
Wealth management is 16%.
Real estate almost 15.
Those are broad numbers.
But you can get the sense that the portfolio is diversified across financial services.
Clinton Fendley - Analyst
And have you seen the weakness across the board, then, or has it been concentrated within real estate and the banking area?
Gary Burnison - CEO
No.
It -- again, I want to reiterate that, you know, we're talking August.
Clinton Fendley - Analyst
Yes.
Gary Burnison - CEO
So in my -- you know, 24 years in business, it's -- it's -- you would never make conclusions out of a month.
One month doesn't make a trend, particularly August, and I would reiterate that in EMEA and Asia-Pacific in financial services, despite the seasonality of the summertime, continue to see strong momentum, and in North America, the results were generally in line with our expectations.
Clinton Fendley - Analyst
And any sense, Gary on how much of Futurestep is financial services related?
Gary Burnison - CEO
Yes, Clint, probably somewhere around 20 to 25%, somewhere in that range.
Clinton Fendley - Analyst
And is there any kind of color that you could add on maybe how that has trended, you know, as we progress throughout Q1 and also since that time?
Gary Burnison - CEO
You know, strong -- business has been strong, Clint.
You know, we -- we recorded in Futurestep and, again, another quarter of consistent growth that was profitable growth.
And we continue to move that business to an outsource recruiting business.
You know, I'm so proud of what that team has accomplished.
Our client satisfaction ratings, and so, no, it's been, again, right in line with expectations.
Clinton Fendley - Analyst
I realize that's a relatively newer business for you, but would you not expect some of the middle management type jobs to really weaken first before some of your executive search, or is there just a different dynamic going on possibly this time?
Gary Burnison - CEO
Well, we're trying to position the business so we're a solution to our clients on an outsource business.
You know, part of that business is actually quite consultative, and part is real consulting projects.
But intuitively, I would think that, yes, you would typically see companies cut back on the lower levels in an organization.
You know, I think that's the trends you would see.
We have not seen that.
Clinton Fendley - Analyst
Okay.
Thank you.
Operator
And our next question comes from the line of Mark Marcon with R.W.
Baird, please go ahead.
Mark Marcon - Analyst
Good morning, Gary and Gregg.
Wanted to ask some operational questions and then some capital allocation questions.
I know that you have gotten a lot of questions on this thus far in the call, but I just wanted to make sure I understand it correctly.
You were mentioning, you know, August, which obviously isn't part of the quarter in terms of the confirms.
You did have a sequential decline during the fiscal first quarter sequentially in North America, and it sounded like it was -- it was due to financial services, if I heard you correctly.
And so I just wanted to make sure I understand that dynamic correctly, and -- and how we should think about it.
You gave us the sequential numbers, but I was wondering, you know, how does that normally look on a year-over-year basis?
In other words is your caution based on headlines or are you actually seeing something in financial services in North America that would temper your outlook with regards to your North American business?
Gary Burnison - CEO
Yes.
Good -- good question.
You know, listen, Mark, we're only, you know, six or seven days in to September here.
Mark Marcon - Analyst
Right.
Gary Burnison - CEO
Right after Labor Day.
It's -- you know, I think it's dangerous to start making, you know, remarks on trends.
Again --
Mark Marcon - Analyst
I'm actually wondering what you saw?
Just, you know, factually.
Gary Burnison - CEO
Yes, we -- we've -- what we have seen in our business is, you know, what we have typically seen in -- for example, if you speak to investment banking in capital markets.
In other words this is not historically a time of the year where there is tremendous hiring.
So what we're seeing from clients, what we're hearing is in those two sectors, for example, is some caution.
Within the other parts of financial services, insurance, ops, infrastructure, and the like, we're continuing to hear that there is, you know, strong activity.
And in fact, again, the level of new business in North America in August was, you know, as high and in -- for a couple of months, it was higher than a couple of other months in this calendar year.
So, you know, you look at that, and it's -- again, you would say it's generally in line with our expectations.
Mark Marcon - Analyst
And so in terms of the -- you know, the deceleration in North America that you actually experienced, what did that -- where would the key areas in terms of -- you know, because that -- that precedes, you know, some of the headlines that came up.
And so I'm just wondering where you saw that.
Gary Burnison - CEO
Well, again, the softening -- you know, if you will, would be in investment banking in capital markets, but, again, Mark, let me just say that financial services year-over-year, okay -- so Quarter 1 '08, Quarter 1 '07, was, you know, flat.
You know, essentially flat.
Mark Marcon - Analyst
Okay.
Gary Burnison - CEO
On a global basis.
Mark Marcon - Analyst
That's what I was trying to get at.
So flat on a global basis, down in North America, up internationally?
Gary Burnison - CEO
Right.
Mark Marcon - Analyst
Okay.
All right.
And then can you talk a little bit about, you know, Lominger and Leadership Development services, and, you know, the potential for margin improvement for the overall organization as a result of the potential swing that you may end up having there, or are you more cautious about that swing coming through?
Gary Burnison - CEO
Well, we're very bullish on what we're doing in the leadership area, Mark.
We -- we today have $52 million run rate business.
The Lominger investment that we made, I mean, first and foremost, the colleagues we brought in from Lominger have been fabulous, have made a huge difference to our clients.
When we made that investment in that business a year ago, that business was doing -- these are rough numbers, Mark, $14 million annually.
Today it's doing 21.
We have a phenomenal opportunity with our leadership business to inject it in to our recruiting businesses, to use it to differentiate ourselves, and to use it to fulfill our strategic mission of helping clients not just identify talent, but deploy, develop, retain, and reward their work force.
So we're very, very happy with what we have done there.
And, you know, we want to see that leadership business -- we want to double that business over the next three years.
With respect to margins I'll let Gregg --
Gregg Kvochak - VP Finance
Yes, Mark, in particular Lominger grew $700,000 sequentially, the revenues were about $5.2 million in the first quarter.
And as you know it it is a business with a lot of operating leverage.
The margin in the fourth quarter was 26% and the margin in the first quarter expanded to 28%.
So, you know, as the revenues grow in that business, we expect profitability to continue to rise.
Mark Marcon - Analyst
And the consulting part of LDS?
Gregg Kvochak - VP Finance
Yes, the consulting part of LDS did about $7 million of fee revenue in the quarter.
And was a little bit upside down, again, just a slight loss in the quarter.
Mark Marcon - Analyst
Okay.
But a lower loss than what you have had?
Gregg Kvochak - VP Finance
Sure.
Yes, we're narrowing -- we're obviously -- yes.
Consultant productivity improves, profitability will as well, and we expect to break even in that business very shortly.
Mark Marcon - Analyst
Okay.
And then, I wanted to ask a question -- you know, I know our board is focused increasing shareholder value and is extremely thoughtful and impressive.
What I'm wondering is, you have been buying back stock, you know, fairly consistently here.
Obviously your stock is -- is down, you know, today and yesterday and the day before due to these increasing concerns about what the outlook looks like, and -- and your -- you are currently trading relative at least to where the street consensus is.
You know, historically low valuations.
Now, I guess that obviously imply there is some doubt as to whether the estimates are correct or not.
But having said all of that, how would you -- what would your recommendation be to the Board with regards to capital allocation, and in particular, how would it enhance shareholder value over the long term, if given your long-term opportunity to be more aggressive with regards to the buyback at these levels relative to what you have been doing?
Gary Burnison - CEO
Well, thank you for the comments on the Board.
We do have a very supportive, and you know, a great Board.
Very independent Board.
It wouldn't be appropriate for me to talk about recommendations that I would make to our Board.
However, you know, we're in the business to serve clients and in the business to create shareholder value.
That is not lost on us at all.
And I think if you look at our track record over the last several years, since we have came in the business, we -- we have done that.
You know, the last few days in the markets, and if you pick up the newspaper, you know, haven't been pleasant reading for a lot of businesses.
You know, there are clouds out there.
When it comes to how we allocate capital, you know, we have been very, very thoughtful, and have tried to strike over the last several years, the balance.
And so if you look at this last year, in terms of how we have, you know, allocated, quote, "our excess capital," you know, say going in to last fiscal year, we had $100 million or so of excess capital.
We invested, you know, 30, 35 million of that in the business in the form of three acquisitions that have turned out to be -- have exceeded by a substantial amount our expectations.
Both strategically and financially.
And then the balance, we return to shareholders.
So in this past year, you know, we think we have struck the right balance.
Your comments about shareholder value and your implied comments about our very pristine balance sheet that we're proud of and we think are a strength of ours, are accurate.
And going forward we're going to continue to strike that balance between investing in the business and returning moneys to shareholders.
Mark Marcon - Analyst
Okay.
Great.
I'll follow up offline, thank you.
Gary Burnison - CEO
Okay.
Operator
And our next question comes from the line of Ty Govatos with CL King.
Please go ahead.
Ty Govatos - Analyst
Couple of technical questions, bonus accrual, tax rate for the year, and the out-of-pocket revenue and costs seem to deviate by a wider than usual margin.
Gregg Kvochak - VP Finance
Sure.
First question with regards to the tax rate, you should expect the tax rate to be about where it is, somewhere in the 38.5 to 39% range for the full fiscal year.
It's up slightly versus last year, this is reflective of our strategy really to repatriate moneys from over in the form of dividends, which has a tendency to put a little bit of upward pressure on our effective tax rate.
What was the other question, Ty?
Ty Govatos - Analyst
The bonus accrual.
Gregg Kvochak - VP Finance
Bonus accrual was about $35 million in the quarter.
Ty Govatos - Analyst
Okay.
Gregg Kvochak - VP Finance
And with regards to the reimbursed expenses, one of the things you have to factor in there, Ty is the cost of sales as it relates to Lominger, is of course not included as a reimbursed expense in the revenue, but shows up in that line item on our P&L.
So as they are more successful, and sell more product, that ratio, that you are looking at --
Ty Govatos - Analyst
Will expand through time?
Gregg Kvochak - VP Finance
That's right.
Ty Govatos - Analyst
Got you.
Hey, thanks an awful lot, Gregg.
Gregg Kvochak - VP Finance
Okay.
Operator
And our next question a follow-up from Elliot Pretcher with Merrill Lynch.
Please go ahead.
Elliot Pretcher - Analyst
Thank you.
Can you expand a bit on the gross margin trends, looks like it picked up quite a bit year on year and Q on Q.
Gregg Kvochak - VP Finance
Gross margin, or the opposite of that, (inaudible) a percentage of revenue, this quarter was about 66.5%.
You know, that's an improvement from almost 69% in the fourth quarter and is really reflective of greater consultant productivity.
Gary Burnison - CEO
And I think G&A was slightly higher.
I think what you'll see is probably a flip flop of that, you know, in the next quarter.
If you look back historically you'll see the [outfitting quarters] there's a flip flop between the comp and benefits ratio and the G&A.
Elliot Pretcher - Analyst
Okay.
Sure, and what is driving that flip flop?
Why would it shift like that each quarter?
Gary Burnison - CEO
Well, if you go back, it has -- and part of our comp and benefits expense is, you know, related to our bonus accruals that are profitability based, and based off -- you know, an annual plan that we present to our Board of Directors.
So you'll see it varies from quarter to quarter.
It has, you know, in the 22 quarters that I have been associated with this firm, and the G&A line does too.
Because, you know, you have lumpy things in there from quarter-to-quarter.
Elliot Pretcher - Analyst
Okay.
Thanks.
And if I could zero in on some of the comments from the prepared remarks regarding investments.
The three items I would hope you can expand upon, the Korn/Ferry Advantage investments, the brands rollout, and finally the focus on people.
And specifically any catalyst that created these needs, and the timing of these investments?
Gary Burnison - CEO
Yes.
These -- these -- you know, these initiatives are -- are, you know, not new.
They are -- have been part of our, you know, strategic plan.
We have a three-year formal strategic plan.
It's updated annually.
The reasoning -- I'll go through each one, you know, the reasoning on the KF Advantage is really to take the fabulous intellectual property we have around leadership, and leadership competencies.
And our own intellectual property about thinking styles, leadership styles and all of that, and really infuse it in to our recruiting businesses, so that we create a more uniform and standardized way of doing our recruiting throughout the world.
How we present ourselves to clients, how we execute on our work, how we write-up our work, and so there's really uniformity and scale, and we hope efficiency.
And also, consistent standards by which to train against.
The branding goes hand in hand with that, and we think we have a unique competitive advantage in the marketplace, with research-based science about leadership, and kind of the art of recruiting.
And we are connecting those in a very direct way, and using it, again, to differentiate ourselves, so it ties hand in hand with our, you know, strategic plan.
And the -- the technology platform that I alluded to, is something that's been in the works for several quarters, you know.
We started down this road a few quarters go.
So each of these are not new things that we, you know, just dreamed up last month.
These are things that -- like everything we do, is well thought out, disciplined, systematic, and, you know, part of our strategic plan.
Elliot Pretcher - Analyst
Sure.
Thank you.
I suppose I -- I would assume there was some incremental investment, because the EPS guidance range looks a bit wider than usual.
Maybe you can explain why that may be.
Gary Burnison - CEO
Well the EPS guidance range, we're trying to be, again, very prudent with, you know, we only guide out quarterly.
We don't guide out further than that.
We're trying to be prudent in light of if you pick up any newspaper around the world, you know, you have to be aware of that.
So, you know, we are trying to be, again, just like we run the business, pragmatic and prudent with respect to our guidance as well.
Elliot Pretcher - Analyst
Okay.
Thank you.
Operator
And our next question is a follow-up from the line of Tobey Sommer with SunTrust, please go ahead.
Tobey Sommer - Analyst
I just had a question of Futurestep and its relationship with the Executive Search business.
Have you gotten any recent examples of either contract wins or expanded relationships that would continue to bear out, I think, one of the strategies that you have in place that Futurestep could lead to, you know, expanded market share within customers in the Executive Search side of the business or anybody who has signed a global contract with you there recently.
Gary Burnison - CEO
Yes, I'm going to mention, you know, client names.
That wouldn't be appropriate.
But, sure, we have examples, where the lead, actually has been our Futurestep business.
I can think of one multi-billion dollar company where the lead into that organization, where we have placed hundreds of people in to that company through our Futurestep business, where we have gotten executive recruiting business.
We have seen it as well with our leadership business.
So, yes, we continue to see examples of, you know, the synergy between these different businesses, and that's what we're trying to do.
I mean, our strategy that is not different today than it was, you know, five years ago or two quarters ago is to continue to drive through multiple solutions, deeper client relationships, and we continue to see success in the marketplace.
Tobey Sommer - Analyst
And one of other question, in terms of expanding your non-Executive Search revenue, I was wondering if you could refresh us as to what your goal is and maybe over what time frame, and you did mention looking at the marketplace in an opportunistic fashion from an M&A perspective.
Would you expect any or acquisitions to be outside of Executive Search and expanding that non-Executive Search revenue piece?
Thanks.
Gary Burnison - CEO
Well, you know, I believe that actually volatility, and I'm not suggesting there is volatility, but I'm a little bit counter-intuitive, volatility creates opportunity, and we're going to seize on that opportunity.
And so, you know, we're going to continue, again, what we have done over the last several years in that if you look on the executive recruiting side, we have shied away from doing acquisitions.
I wouldn't rule it out.
We have looked at it in the past.
You know, we continue to be very proactive in our corporate development efforts.
That's something we have typically shied away from really for the first and foremost reason of culture fit.
It's the same when we are bringing people into this organization.
I'm very proud of the culture that with have built.
And so we're mindful of that as we look at, you know, investments.
In terms of the -- you know, any mix, you know, our goal looking out three years is to have at least 25, 30% of our business coming from non-executive recruiting, and the reason isn't to diversify for the sake of diversification.
The reason is to differentiate our flagship business and differentiate ourselves with our clients, and so everything that we do really needs to reinforce our businesses, and we're going to continue with that.
Tobey Sommer - Analyst
Thank you.
Operator
And our next question comes from the line of Josh Vogel with Sidoti and Company.
Please go ahead.
Josh Vogel - Analyst
Hey, good morning, guys.
You know, it's apparent that M&A activity is slowing, but I was wondering if you could give us, maybe a snapshot of the M&A environment in some of your smaller markets, like the Asia Pacific and South America?
And basically if M&A activity picking up in these regions what impact does that have on your executive placement business?
Gary Burnison - CEO
You know, it will have a very good -- you know, very good impact on our executive recruiting business.
I cannot -- you know, I can't sit here and comment that we have seen increasing levels of M&A activity.
That --you know, that would just -- that would be irresponsible of me.
However, you know, again, our business -- the thing we're very proud of, it is quite diversified and quite nimble, and so I think you will see, you know, that -- that we can easily react to the market.
And, again, that kind of volatility creates opportunity for us.
Josh Vogel - Analyst
Okay.
Thank you.
Operator
Our next question is a follow-up from the line of Mark Marcon with R.W.
Baird, please go ahead.
Mark Marcon - Analyst
Just wondering, Gregg, do you have the locals currency growth rates for Europe and Asia Pac?
Gregg Kvochak - VP Finance
Well, are you talk year over year or --
Mark Marcon - Analyst
Yes.
Gregg Kvochak - VP Finance
Year-over-year in Europe FX was about $4.7 million.
Mark Marcon - Analyst
Okay.
Gregg Kvochak - VP Finance
And Asia-Pacific, about $1 million, and about $.5 million in Latin America.
Gary Burnison - CEO
Keep in mind, Mark those are spread among all of our businesses, so that's not just executive recruiting.
Gregg Kvochak - VP Finance
Right.
Mark Marcon - Analyst
Okay.
I was just -- obviously you are seeing accelerating growth in Asia-Pac.
You know, one of the challenges have been getting consultants over there.
I'm wondering what you are seeing there, and, you know, when we take a look at your international business, it looks like it's more than 50% of your total revenues at that point.
You know, can you talk a little bit about -- the secular drivers internationally, particularly in Asia-Pac, and how big that could ultimately be.
Gary Burnison - CEO
Well, we're very bullish.
I just -- I was in China, we opened a new office in Guangzhou, we now have three offices on the Mainland, plus Hong Kong.
You know, we have a work force of, you know, 150, 175 people, a very, very talented work force throughout -- you know, throughout China as well as through the other countries in Asia.
If you look at Asia, you know, China and India are 50% of the business there today.
And if -- if you look long term in terms of the labor arbitrage, the investment, you know, we believe we have a first mover advantage there in China, for example.
And, you know, India you could say the same thing.
But we are actually quite bullish on what they could mean to Korn/Ferry in the longer term.
And in EMEA, again, what we have done there, and particularly on the continent, very, very, very great team there that we have built.
So, you know, you are right, the international business is -- you know, is a very significant part of Korn/Ferry today.
Mark Marcon - Analyst
Just in terms of Asia-Pac, I mean, what are the constraints to maintaining that growth?
Or -- aside from obviously cyclical factors.
Gary Burnison - CEO
Yes, well it's a little bit -- not to be overly simplistic, but it's a little bit of the challenges that our clients have.
For example, let's just focus in on China, it's great people, great talent to drive the strategy.
Obviously with respect to China, there's some other, you know, more structural issues around, you know, how much business you are doing with local companies and, you know, there -- their degree of familiarity with Western practices, you know, you have those kinds of questions versus working for multi-nationals, but, you know, it really comes down to like any business, despite all of the technological innovations of the past centuries, people make businesses successful.
And we are no exception to that.
Mark Marcon - Analyst
Okay.
Great.
Thanks.
Operator
And our final question comes from the line of Tobey Sommer SunTrust.
Please go ahead.
Tobey Sommer - Analyst
Thanks, one wrap-up question.
As an -- excuse me -- financial service is about 22% of overall revenue.
Would that represent -- would the proportion of consultants working in financial services also represent a similar figure?
Gary Burnison - CEO
No because the average fees are substantially higher.
Tobey Sommer - Analyst
So if you were to ballpark it, more like 15% of consultants or something like that.
Gary Burnison - CEO
Well, we have never given that you, I'm not going to.
But it is substantially less than the revenue mix.
Tobey Sommer - Analyst
Okay, thank you very much.
Gary Burnison - CEO
Okay.
Operator
And we do have one more question that has just queued up, George [Mailess] with Lord Abbott, please go ahead.
George Mailess - Analyst
Thank you.
Just wanted to go back to Elliott's question regarding the G&A.
It was up substantially this quarter, and I think it was up year-over-year as well as sequentially.
And I think last year if we look at the first quarter it was down sequentially.
So I'm just trying to get a little bit of color in to that, and if there was sort of -- what was the lumpiness that --you know, that made that big increase?
Gregg Kvochak - VP Finance
Well, if you look at the fourth quarter, of '07, there were -- let's say some one-time or unusual expense benefits in the quarter.
In particular, the bad debt accrual was lower in the fourth quarter of '07 than -- versus the fourth as a rate -- versus the first quarter of '08 here.
So that is driving, you know, some of the increase that you are -- that you are seeing in the G&A expense.
Gary Burnison - CEO
That tends -- again, that tends to bounce around.
I mean, our DSOs today are 60 days.
That bounces around historically since I have been here between 58 and 62 days, so, you know, from quarter-to-quarter, you know, that's an estimate, and it will change.
George Mailess - Analyst
Right.
Right.
Gary Burnison - CEO
And it will vary.
George Mailess - Analyst
Was there something else in bad debt there that moved the needle there?
Because it seems that the needle moved a lot.
Gregg Kvochak - VP Finance
That's really the biggest -- the biggest component in the quarter, George.
George Mailess - Analyst
Okay.
All right.
Gregg Kvochak - VP Finance
And that's volume driven.
George Mailess - Analyst
Yes.
Okay.
Thank you.
Operator
And Mr.
Burnison there are no further questions.
Gary Burnison - CEO
Okay.
Well thank you for taking the time.
We are very proud of what we have here today at Korn/Ferry.
We're making great strides.
We believe the opportunity that lies before us is significant.
I'm excited about the future.
And look forward to continuing to execute on a strategy that's made us the clear industry leader.
So again, thank you for your time.
Operator
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