Korn Ferry (KFY) 2010 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome 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, this conference is being recorded.

Before I turn the conference over to your host, Mr.

Gary D Burnison, let me first read the cautionary statement to investors.

Certain statements made in the presentation today will constitute forward-looking statements within the meaning of the Private Securities Legislation 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 release related in this presentation.

In the Company's annual report for fiscal 2009 and other periodic reports filed by the Company with the SEC.

With that, I will turn the conference over to Mr.

Burnison, [Chief Financial Officer].

Please go ahead, Mr.

Burnison.

Well, good afternoon everyone.

Today I'm really pleased to report that we had sequential revenue growth of 20%, which is actually almost double the industry growth rate of 10% as reported by the AESC which is our trade organization.

That was really due to broad-based growth in every market sector and line of business that we're in.

We achieved $140 million in consolidated fee revenue and further, we recorded positive operating earnings and our balance sheet remains pristine with $261 million in cash and marketable securities.

I don't think I have to tell anybody on this call, the mood today is quite different from a year ago, when the markets were teetering and consumers stopped consuming and the credit markets froze.

I'd say while the economic climate is still tentative, and industry trends certainly reveal lower year-over-year activity, Korn Ferry's business is up substantially from the cyclical lows that were just eight months ago.

And as I look back over that period of time, I'm very proud of this organization.

We not only preserved the franchise during this unprecedented downturn with an operating boundary of positive cash flow, but looking forward, we have positioned the Company for growth and we're going to accelerate through the economic turn by following our six core initiatives, which really begins with how we go to market, institutionalizing our go-to-market approach, enhancing our cross-border business, cross line of business activity and creating a consistent approach to client service.

At the same time, we're going to extend and elevate the brand to create the top of mind brand in human capital.

Our strategy for the high end of the market is working, not only are we expanding our presence in C suites and board rooms around the world, but we've also seen a significant increase in our Board related consulting assignments.

I'd say our succession planning offering continues to be impressive.

We've conducted well over 20 succession engagements in the first half of our fiscal year, this fiscal year, and that's been highlighted by three Fortune 100 CEO succession projects.

But we're also extending the brand through online initiatives, as well as traditional offline marketing initiatives.

Last week we launched our new quarterly periodical, the Korn Ferry Institute Briefings On Talent and Leadership, which includes articles from award winning journalists and authors focused on areas ranging from succession to governance and risk.

The periodical has been sent to over 20,000 global executives and Boards and it's available at major book retailers, airport news stands and other outlets.

We're going to continue to scale our leadership and talent consulting business, as well as Futurestep.

25% of today's Korn Ferry is generated from these businesses.

If you look at our top five accounts, three are integrated services, where we're delivering multiple solutions to those clients across all of our lines of business.

In the quarter, our leadership business improved 14% sequentially, to almost $19 million, and it's been our best performing business unit during this great recession.

And for Futurestep, our outsourced mid-level business, it gained 9% sequentially, primarily due to improvements in North America and Asia.

We're going to continue to migrate that business to more of an RPO model and that's our strategic focus for that business.

We're going to be steadfast in pursuing transformational opportunities along the broad HR spectrum.

I am absolutely pleased with the integration of Whitehead Mann and more importantly the addition of the colleagues there in Europe.

We're going to continue to systematically explore opportunities that are going to extend our capabilities and deepen relationships with clients.

Finally, we're going to create a lifetime career destination for our colleagues here at Korn Ferry.

During the quarter, we added eight consultants who is going to expand our expertise in areas ranging from private equity and life sciences to consumer and commercial banking and last month, we were very pleased to hire [Al Delatra], a 20 year Accenture executive to lead and grow our global technology business.

To say that while we're encouraged by what we've experienced over the last quarter and certainly above industry growth.

A few days of rain doesn't necessarily end a drought.

And so our outlook continues to be clouded by an unsettled banking system, frugal consumers and an unknown commercial lending bubble.

Nevertheless, during this economic climate it has not delayed our course, nor has it altered our destination.

We're going to continue to focus on seizing opportunities in any kind of environment.

With that, I'd like to turn it over to our Chief Financial Officer, Mike DiGregorio.

Mike?

Thanks, Gary and good day to everybody.

After bottoming out just six months ago, demand for integrated talent management services has continued to steadily improve around the world.

Our fiscal second quarter marks the second consecutive quarter of strong sequential growth, with fee revenue improving over 20% to just over $140 million.

In fact, the $23 million of sequential fee revenue gain in the quarter is the largest quarterly improvement for Korn Ferry since fiscal year 2000.

Additionally, the current market rebound has been broad-based, with all of our operating regions and divisions posting significant fee revenue improvement, compared to the first quarter of fiscal year 2010.

Just as importantly, all of our recent restructuring initiatives have continued to pay tangible dividends as the firm returned to profitability for the first time in three quarters while continuing to generate positive operating cash flow.

At second quarter end, our worldwide cash and marketable securities balance stands at over $261 million, and our firm continues to be the most liquid and well-capitalized in the industry.

In the second quarter we took additional actions to rationalize our cost base in Europe.

These actions are designed to create additional operating efficiencies by centralizing certain execution services in geographic clusters.

We have minimally reduced our overall footprint in Europe without materially affecting our overall market reach, as select smaller country markets will continue to be serviced from adjacent larger countries.

The net impact of these actions is a projected additional annualized savings of $8 million.

The nonrecurring costs associated with these actions was $7.6 million, and this was offset in the quarter by the reversal of $4.8 million of restructuring charge recoveries that were expensed in prior quarters.

Excluding these charges, consolidated second quarter operating earnings improved over $11.8 million sequentially, to $5 million, while operating margin improved from a negative 5.8% in the first quarter, to a positive 3.6% in the second.

Consolidated second quarter operating earnings and margin net of all nonrecurring charges were $2.2 million, and 1.6%.

Finally, second quarter earnings per share excluding net nonrecurring charges were $0.09, an improvement of $0.14 sequentially.

On a GAAP basis, after restructuring charges, second quarter earnings per share were $0.06.

Now I'll turn it over to Gregg Kvochak to review our operating segments in a little more detail.

Gregg?

Thanks, Mike.

Starting with the executive recruiting segment, consolidated executive recruiting second quarter fee revenue improved to $123.3 million, up $22 million or 22% sequentially, but off $37 million or 23% year-over-year.

On a constant currency basis, executive search fiscal 2010 second quarter fee revenue was up over $20.5 million, or 20% versus the first quarter of fiscal 2010.

Year-over-year, on the same basis, fiscal 2010's second quarter fee revenue fell $34 million or 22%.

As previously stated, second quarter sequential fee revenue growth was broad-based with all operating regions and specialty practices higher.

Executive search newly opened assignments were up 17% in the three months ending October 2009 versus the three months ending July 2009.

The North American region posted the strongest growth with second quarter fee revenue up $12.9 million, or 23% sequentially.

Compared to the second quarter of fiscal 2009, fee revenue in North America was off $23 million or 26%.

Sequentially, all major specialty practice markets were up sharply led by financial services, up $4.3 million, or 72%, consumer goods, up 33%, technology, up 30%, and industrial, up 24%.

Newly confirmed assignments in North America grew 17% in the second quarter, versus the first quarter of fiscal 2010.

Compared to the second quarter of fiscal 2009, all major specialty practices were down.

Market conditions in Europe also were strong in the second quarter, with fee revenue growing $6.2 million or 21% sequentially to $36.4 million.

On a constant currency basis, Europe second quarter fee revenue declined 7% or $3 million year-over-year, but grew sequentially $5.5 million or 19%.

12 of 19 individual country markets grew sequentially in the second quarter, led by the UK and France, both up 37%, and Switzerland up 140%.

On a specialty market basis, all major practices were up sequentially led by the consumer goods.

And in the Asia-Pacific region fee revenue was up $1.2 million, or 10%, reaching $13.6 million.

On a constant currency basis, fiscal 2010 second quarter fee revenue was off 36% or $7.6 million year-over-year, but up 8% or $1 million sequentially.

Six of 13 Asia-Pacific country markets grew sequentially led by Australia, up 34%, China, up 21%, and Singapore, up 15%.

The financial services, industrial and technology specialty practices were the largest sequential growers in the quarter, up 26%, 31%, and 24% respectively.

In Latin America, fee revenue was up $1.7 million or 38% sequentially, to $6.1 million.

Second quarter fee revenue measured in constant currency was off 8% or $500,000 year-over-year, and up approximately $1.4 million or 31% sequentially.

At the regional level, all seven individual country markets were up sequentially, led by Brazil, which was up $600,000 or 31%.

The total number of executive search consultants at the end of the first quarter was 497, down four sequentially and down 38 year-over-year.

The average fee per search was approximately $73,000 in the second quarter, and was essentially flat sequentially, but down 21% year-over-year.

Annualized second quarter fee revenue production per consultant grew 24% sequentially to $930,000.

Excluding a net restructuring charge of $5.3 million, consolidated executive search pro forma operating earnings were $14.9 million, down $11.6 million year-over-year, but up $9.8 million sequentially.

The consolidated executive search operating margin was 12.1% compared to 16.6% in the second quarter of fiscal 2009, and 5% in the first quarter of fiscal 2010.

Including restructuring charges, the second quarter operating earnings were $9.7 million, with an operating margin of 7.8%.

Now turning to Futurestep.

Fiscal second quarter fee revenue grew for the second consecutive quarter reaching $16.9 million.

Measured on a constant currency basis, second quarter fee revenue fell 42% or $12 million year-over-year, but was up 6.5% or $1 million sequentially.

Geographically, sequential business trends were strongest in North America and Asia-Pacific, where second quarter fee revenue was up 11% and 12% respectively on a constant currency basis.

Futurestep returned to profitability in the quarter with consolidated operating earnings of $140,000, or a 1% margin, excluding a $2.6 million benefit in the quarter from a lease related restructuring expense recovery charged off in a prior period.

I'll now turn the call back over to Mike to discuss our outlook for the third quarter of fiscal 2010.

Based on the recent monthly new business trends, the global demand for our services has improved.

The overall volume of new business awards has been very consistent over the last several months.

Given these trends through the month of November, and considering the impact of a modest decline in new business due to year end vacation seasonality, fiscal 2010 third quarter fee revenue will likely range from $130 million to $145 million, and earnings per share will likely range from $0.05 per to $0.15.

That concludes our prepared remarks.

At this time, we'd be glad to answer any questions you might have.

(Operator Instructions).

Our first question comes from the line of Tobey Sommer from SunTrust Robinson Humphrey.

Please go ahead.

Thank you.

You commented, I believe on the productivity per consultant cracking $900,000 on an annualized basis.

I was wondering if you could comment about the opportunity you see there in productivity, kind of more generally over a cycle and perhaps whether you have any new technology deployments or have made some cost cutting initiatives that could allow for more productivity in this cycle than the last one.

Yes, well, good afternoon, Tobey.

If you just look, simply if you look at the last cycle which wasn't that long ago, given this great falloff, I mean, we were at almost $1.3 million per consultant.

And so as we've operated the business, we have quite purposefully made sure that we don't over-fire and over-hire such as some other industries.

So we look at the top line capacity and think there's about 40% there.

Okay.

Thank you.

In terms of financial services in the US, which had a -- I guess a real, real strong quarter, I was wondering if you could share with me what your expectations are kind of over time, because I think seasonally, isn't the first half, first calendar half of a year typically the high watermark, kind of after bonus season and then you get a little flurry of turnover, just trying to see if you could refresh my memory on how that typically proceeds.

Yes, that's exactly right.

I mean, I don't think there's any -- I don't know if past results are predictive of the future, given what's happening in that industry, but yes, bonuses are typically communicated and paid towards the end of the year, and historically, you see a great deal of activity, particularly in the capital markets and investment banking areas, and you would have to think that going into early 2010, that you're going to see that kind of movement again.

Just wondering if you could comment on the growth you did see in that area.

Was that -- could you tell if that was reflective of simple turnover and reshuffling of seats or was there some growth in actual positions in that -- in those achievements in the quarter?

It was a little bit of both.

I mean, first, Toby, this is coming off a very low base, so we have to -- there was a 43% sequential improvement in financial services, which blew the industry away, by the way.

If you look at the AESC statistics.

So overall we have absolutely outperformed the market but if you look at financial services, it was pretty broad-based with the exception of one area that you could probably guess, and that's real estate.

And so it was really a combination of new positions as well as some shuffling.

Thanks and I'll part with two questions, I'll get back in line.

Could you comment on whether this sequential growth you've now seen is enough to make you want to start adding net heads, consultants on a sequential basis?

And then I was hoping you could just give us a commentary on what seasonality has typically been for this January quarter in kind of a stable market.

Is it typically down sequentially?

Up?

Flat?

How has that worked over the years.

Thanks.

I'll let Mike and Gregg answer the second question.

In terms of the first, we've been fairly consistent in our outlook.

People, that's the lifeblood of any professional services firm, and our brand is our colleagues around the world, and so even during this great recession, we've had a consistent view.

Today, we've got about 500 consultants.

If you go back a year ago, we had about 535.

Certainly, we took a hard look at that a year ago when this free-fall happened, and we reduced it below 500 and during that time, we've continued to upgrade.

And so I just believe that in running a business, you have to have a consistent view.

If you've got liquidity, which we do.

We have a pristine balance sheet that we're going to use to our advantage.

So we've had a consistent view when it comes to the consulting base and, you know, we're not really changing the playbook there.

The other thing that I would add to that, obviously is as Gary said before, we continue to very selectively add talented people and we're constantly in contact, a lot of people looking to -- seem very excited by the opportunity this company presents and as Gary said, we added eight new ones in the second quarter, 12 in the first quarter and our plan is to continue to look forward.

At the same time, we continue to kind of weed out the lowest performers and productivity.

So it's a constant process, and we're constantly looking as satisfied as we are at the improvement, still a lot of unknowns so we continue to take costs out of the system at the same time.

So meanwhile, obviously that -- to your other question, this time of year, because of the holiday, seasonality, we definitely see a dip in the December period.

Historically, we've seen declines of 10, 15%, thereabouts, combination of the December holiday, slow start in January, so traditionally that's been the case and there's no reason to think it would be significantly different this year.

Thank you.

The next question comes from the line of Kelly Flynn from Credit Suisse.

Please go ahead.

Thanks.

Just I'd like to ask you to drill down a little more into where you're seeing the pockets of strength by industry and any pockets of weakness or lagging?

I know we've talked about financial services but could you get into broader detail on that?

Yes, sure, I'll try it at the high level, Kelly.

Good to hear your voice.

Thanks.

I would say if you look, life sciences and healthcare, we are operating at almost our prerecession levels.

The industrial business has been a beacon of this company.

I would certainly say we have the broadest and deepest footprint of anybody that's operating in this space and in that segment, again, it's been broad-based and the consumer area, we were very, very pleased with what we saw this quarter sequentially in the area of fast-moving consumer goods and that was a bit of a surprise.

I think the one that we did not see the growth level that we probably will see in the future is technology.

Now, maybe you could make an argument that those companies didn't quite down size as much as, say, financial services.

We also saw huge increase in Q1 over Q4.

So that came up quite a bit.

That's right.

So I think that as you really look at it, it was pretty broad-based and that gives us tremendous hope for the short term future.

Okay.

Great.

And then on the restructuring, are you finished with that, or can we expect more down the road in the short term.

As far as major kind of accounting restructuring, yes, it's a -- we are finished.

And again, this was a little bit unusual, obviously, because we had the restructuring in Q1 but what happened was we had a new President come in, really at the end of that quarter, and once he kind of got in the saddle and really assessed how he wanted to go about the business strategically, took a pretty different view.

So yes, we think we're at a point where we've really realigned the business, we want to operate it and feel good about the talent and again we will continue to look for and probably add some more talent in particular places but yes, as far as restructuring charges, they're behind us, but we will see reflected in ongoing earnings as we said, additional severance charges as we go because we are constantly kind of weeding out and upgrading productivity.

Okay.

Then one last one.

Forgive me if you said this before but can you remind us of what your most recently disclosed mix is of business by vertical?

Yes, one second here.

We'll pull up some numbers.

Business by vertical, we're -- today we are about call it 20% financial services, 17% consumer, about 25% in industrial, 10% in life sciences and then another 6% in the healthcare area, and then the balance would be in education, not for profit area.

Okay.

Technology.

I'm sorry, technology, about 15%, sorry.

Okay.

Thanks a lot.

I appreciate it.

Thank you.

(Operator Instructions).

Now I'll go to the line of Mark Marcon from RW Baird.

Please go ahead.

Good afternoon.

Nice sequential uptick here.

Just wondering if you could talk a little bit about the pricing that you're seeing out there in the market.

When things got a little bit tougher, there were some movement away from the traditional pricing structure.

Can you talk about how that's unfolded and what you're seeing now?

Well, thanks for those comments by the way, Mark.

One thing that we're very, very proud of is the fact that in this last cycle, we raised the average fee at Korn Ferry from $55,000 to low 90s.

And so I -- we've had had to be very scrappy.

The industry has had to be very scrappy.

Sure.

So it's good to -- it's certainly good to see a little bit of a sequential uptick in fees, to $73,000.

I don't think there's been anything structurally in terms of pricing, other than a typical pattern in a recession.

I was just wondering if relative to -- I mean, I know that the fees have been going -- that they moved up sequentially, but underneath the surface, obviously there's some currency benefit.

There could have been some mix benefit with regards to financial services.

I'm just wondering if you're -- if the clients are -- the behavior among some of the clients is still in kind of a bargain hunting mode or if they're just going back and saying okay, things are a little bit more normal and we're going to go back to the old pricing structure?

Well, I don't think anybody is -- I think nobody is thinking that they're going back to the old normal yet.

Okay.

I don't -- just don't see that.

I mean, the amount of consumer deleveraging right now, the fact that we could see credit contract by $3 trillion, that has a 700 BP impact on GDP, I think that people are still hoarding cash, Mark.

I think the banking system as you know is still tight, very, very tight, and there's a bias toward liquidity and I think that CEOs running businesses are very, very careful and have a bias towards their balance sheet.

And the left-hand side of that balance sheet.

So I think that that is what's going on more than anything.

And then can you talk a little bit about as you look towards this -- hopefully this upcycle, the areas where you would hope to invest the most and also if you could talk a little bit more about -- during the last cycle you certainly did update the talent and the productivity levels went up materially.

Can you talk about -- and obviously this is -- it's going to be a difficult to predict cycle, but if it were anywhere close to normal, what you would hope things could look like a couple of years from now?

Well, we still have the same strategic view of the business.

I mean, we really think we've got the opportunity that we create a Company that much like a CEO thinks of McKenzie for strategy or Goldman Sachs on the financial side or Accenture on the cost side, they think of Korn Ferry when it comes total only and people and we still view this as a multi billion dollar opportunity and in terms of our six strategic initiatives, those are remaining the same and really everything's anchored around how do we -- you know, how do we differentiate that flagship search business, how can we give our colleagues reasons to talk to clients throughout the whole year.

And so from an M&A perspective, I think we've been very consistent.

We've done six transactions and that consistency is going to continue.

When it comes total only, as Mike said, in the last six months we've added 20 consultants into the business, excluding the great colleagues at Whitehead Mann.

So again, we're -- I just do not believe in running a business that in great times you spend all sorts of money and in bad times you totally hunker down.

I think you have to be consistent in your approach, as long as you've got ample liquidity, which we do.

Can you talk a little bit about Whitehead Mann, a little bit more about how well integrated it is now.

Is it all in the same office?

How well set up is that at this point?

It absolutely is in the same location and we've been in that location now for several months.

I would say that last month in the Company's 40 year history, we had our best month ever in the UK.

And so I view that as really a growth platform, not just for the UK, but for Europe.

And that's what we're going to use it.

We're going to invest into that, and continue to make our European business a flagship of this company.

If you look at the culture and the colleagues, and what they've added, I think it's been phenomenal, the integration plan, the results are exactly in line with our expectations.

In fact, they're better.

And so I'm looking back now on this over the last six months, I'm very proud with what we've accomplished and we've got a lot more the to do.

Great.

I'm going to hop off for now and I'll jump back on later.

Thank you.

It appears there are no further questions, Mr.

Burnison.

We do have somebody that just queued up again.

Tobey Sommer from SunTrust Robinson Humphrey.

Please go ahead.

I wanted to ask you about the non-search revenue you have invested in overtime, I think you suggested you are likely to continue to invest in.

Wondering if these business models which can be different, the extent to which you've had trouble kind of aligning them with the transactional executive search business model, where you feel like you've got to, after years of operation with these business models operating next to each other, whether you figured them out and can kind of invest more heavily in those areas after digesting and having that learning curve?

Thanks.

Well, we do.

I would -- where we are today is very analogous to, say, the big eight accounting firms in 1984 and 1985 and I really do believe that there is that kind of opportunity to differentiate our flagship search business and that's what we're absolutely passionate about.

So this is a journey.

It's not something that you can make a proclamation and achieve a certain percent of your revenue in a quarter or two.

We're really looking at this as how can we differentiate ourselves in the eyes of our clients, and really deepen our relationships with our clients.

And so the integrated go-to-market approach is something that you've got to work on and you've got to have a realistic runway for what you can and can't do.

But I tell you, you know, now I've been here eight years and looking at where we are today and what we've done with this business, I am very, very proud of our employees and how we have really embraced a Korn Ferry One strategy.

But I really think that there is an awful lot of opportunity here for us, over this next decade.

As one follow-up, I was wondering if you could comment about if you have a kind of bias at all in expanding those businesses towards the people reliant businesses, many of which you have in that area, or more of the intellectual capital kind of product businesses that you've acquired, I guess over the years, and that have demonstrated pretty significant profitability.

Thanks.

That's a very good question.

Again, I think it all really is anchored around this flagship offering of executive search and how you can differentiate it.

Having said that, when you look at our business this is a services business.

This is a people business.

And from the standpoint of scale, you would like to make selective investments in businesses that are more scalable than just hours in the day.

And so for example, our Lominger business last month reported a 36% year on year increase in that business.

It has an operating margin in the mid-30s, 30%, 35%, and we've taken that business and almost doubled it since it's been part of Korn Ferry.

So again, I do believe that there is opportunity to take the intellectual property we have and not only use it to differentiate our flagship search business, but also to create scalable businesses in their own right and that's what we're going to do.

Thank you very much.

Thank you.

And now we'll go to the line of Mark Marcon from RW Baird.

Please go ahead.

Just wanted to ask a little bit more about future investments.

Can you talk a little bit about the international opportunities, particularly Asia-Pac.

When we take a look at the sequential revenue growth that we saw in the US, obviously that's very impressive.

How should we think about Asia-Pac, how you're positioned out there and how well you could take advantage of the longer term secular growth there as well as potentially in Brazil and other faster growing emerging markets?

Yes, thank you, Mark.

Brazil's an interesting one.

We're right now studying the outsourced recruiting market there and what we could possibly do.

With Asia, we've been very, very careful in that we have -- we made investments.

We've been in China for 14 years and so we've made investments during this last cycle that we were very careful not to go in, which would be the temptation, and kind of over-fire.

We do believe that that represents a very compelling growth story for us, given that 45% of the world's population is in at least two of those emerging countries.

At the same time, you have to recognize that some of those are relatively new emerging markets, when it comes to professional services and particularly executive search and leadership and so China, for example, we are trying to position the firm for the long term and really with local companies.

And with that, there is a greater investment and patience that you have to have.

So again, I think if you look at where we are, half the business is from outside North America.

But those are interesting opportunities and I think we've demonstrated that we've invested in those and our view today hasn't changed from, say, three years ago, Mark.

So you would still expect that those places longer term are going to show materially faster growth?

The reason why I'm asking this is because when we take a look at the sequential constant currency trends, North America outperformed, and when you look at the economic headlines, it sounds like Asia-Pac and some of the other emerging economies have actually been doing better economically than here and so just kind of wonder a little bit about like, well, what's driving that.

Yes.

Well, I think that's -- look, that's fair.

I mean, North America absolutely outperformed when you compare it to the AESC numbers.

You're talking about 28%, 25% sequential growth.

An opportunity for us is to continue to make this firm global and the investment into Europe that we did six months ago in the face of this unprecedented storm, we did that for that very reason, to use it as a growth platform.

And so I don't think that if you look at Asia, certainly it's sequentially, we would like to see greater growth but we also have to recognize the markets that we're in there.

We've got a big business, a lot of people in China.

I'll tell you that Futurestep Australasia, as an example has performed remarkably well over the past 28 quarters and there that business is anchored in 70% outsourcing and quite candidly we've got to take that model and move it to places like Brazil and others.

The early stages of this downturn you were one of the first to -- out of many of our management teams to recognize that we were going to go down a difficult path.

As you're looking at the current rebound in North America, is there any sense that you have in terms of how much of that rebound just over the last quarter or so has been just pent-up demand that was kind of frozen during the downturn and it's finally being released, or do you think that this is something that's more sustainable?

Obviously talked to all of the major consultants and just trying to get a sense for what you're hearing from them.

Yes.

Well, you try to look back in history and try to predict the future and it's very difficult to do.

I will tell you that the -- where we're operating right now on a run rate basis is almost between the peak of the last cycle which was just about 14 months ago, and the trough which was eight months ago.

That's basically where the business is operating, and when we first started making public comments about this in September of 2007 in terms of our base case recessionary plan, we would have thought at that point that where the business is now would have been the base case recessionary plan.

So in terms of your question on pent-up demand, versus anything else, it's really hard to say.

I would only tell you that the world just stopped in the third week of October of last year and nobody did anything.

CEOs had this tremendous focus on cash and I would only tell you that today there is still a bias towards liquidity.

And I think that that has got to be the question on people's minds, as well as the tremendous credit contraction and this -- we're getting off this addiction to consumer spending to it's very hard to say what the catalyst is and what the new normal is going to look like, '10 and '11.

I just think you've got to be -- with us, we're consistent in what we're doing and we're committed to seizing opportunity in any kind of market.

It sounds like -- I mean, given that those comments, we may continue to upgrade the talent level but we're probably not going to see a big ramp-up in terms of your headcount any time soon?

Again, I think - I don't know if my view's going to be any different than the other 3,000 CEOs of NYSE publicly traded companies.

I think it's very difficult to get a net new hire into an organization today.

And it's like we're filling up a pool with a bucket and we'll have to see in the first calendar quarter what the environment really looks like after the holidays.

Appreciate the comments, Gary.

Thanks.

Thank you.

There are no further questions at this time.

Mr.

Burnison?

Thank you.

I first of all thank our shareholders for supporting us.

I also thank our internal shareholders, our colleagues.

This has been a remarkable time in business history.

And I'm very proud of what we've done but we've got a lot more to do.

And with that, I'd wish everybody on this call a wonderful holiday season and Merry Christmas.

Thank you very, very much and we'll talk to you in early 2010.

Thank you.

Ladies and gentlemen, this conference will be available for replay for one week starting today at 4 p.m.

Eastern and running through the day December 15th at midnight.

You may access the AT&T executive playback service by dialing 800-475-6701, and entering the access code of 119378.

International participants may dial 320-365-3844.

Additionally, the replay will be available for playback at the Company's website at www.KornFerry.com in the Investor Relations section.

That does conclude our conference for today.

Thank you for your participation.

You may now disconnect.