Korn Ferry (KFY) 2011 Q1 法說會逐字稿

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, this conference is being recorded.

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

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

Certain statements made in this presentation today such as those relating to future performance, plans and goals, will constitute as 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 release relating to this presentation and the Company's annual report for fiscal 2010 and in other periodic reports filed by the Company with the SEC.

Also, some of the companies -- some of the comments today will reflect non-GAAP financial measures such as adjusted operating earnings.

Investors should review our reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures contained in the release relating to this presentation which is posted on the Company's website at www.kornferry.com.

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

Burnison.

Please go ahead.

Well thanks, everyone, and good morning.

I am very pleased to report our results today which reflect a fifth consecutive quarter of growth and a year-over-year improvement in the top line of 50%, which was really due to just about every market sector and line of business that we operate in, fee revenue was $175 million, and it was up 5% sequentially on a constant currency basis.

Our operating margin was 11%, and our balance sheet is absolutely pristine.

Needless to say, I am enormously proud of our organization.

The strategy, the resolve of our colleagues has once again enabled Korn/Ferry to outperform the industry.

Based on a recent report by the AESC, our performance continues to outpace our peers.

For us, the whole is truly stronger than the sum of its parts.

We're absolutely pushing forward to further transform our firm, the industry, the focus on global clients is relentless.

It is our differentiation which is really enabling us to succeed against the backdrop of, quite candidly, still a very difficult labor market.

Not only are all of our businesses operating profitably, but our leadership and talent consulting business actually achieved its best month ever in July with almost $9 million in revenue for the month.

Our Futurestep and leadership businesses now comprise about 25% of the overall organization.

We're very excited.

We look forward to continuing the momentum in the months ahead.

We're going to continue to accelerate our strategic initiatives, further integrate our lines of business, capitalize on our strong balance sheet, adding to and developing and retaining all of our colleagues, all while balancing investment in profitability.

And for us, it all begins with our clients and how we go to market driving an integrated solutions based approach.

At the same time, we're elevating and extending our brand.

At the top of the house, we continue to secure higher level work with our clients.

That's illustrated by the fact that that business is up 80%.

Our CEO and board assignments are up 80% year-over-year.

And I would say that it is impressive as our growth has been, I believe that this is just the beginning.

We're going to remain focused on increasing mine share and relationships at the highest levels of the global business community.

We're going to continue to scale Futurestep and our leadership business.

Our leadership group for the quarter achieved about $23 million of fee revenue.

We are clearly establishing deeper footholds with global clients who are embracing our strategy and our diversified approach and services, and that could be from leadership development to succession planning to enterprise learning.

Futurestep had a good quarter, improved 12%, $2 million sequentially to about $20 million in revenue, was driven by really broad based growth from a geographic perspective.

We continue to secure several large RPO assignments that should help to drive our growth in the future.

We're obviously committed to continue to be very systematic and very careful, but at the same time, looking at transformational opportunities that give us reasons to talk to clients throughout the whole year.

Those not only differentiate our firm, but I believe that they will diversify the revenue mix and create more sustainable shareholder value in the long run.

And lastly, we're advancing our organization as the premier career destination in the industry.

During the quarter, we promoted and added high caliber talent to our organization, industry leading consultants that I think are attracted to our transformational strategy and our success in the market, as well as our financial strength.

Over this last quarter, I have spent almost the entire quarter in Europe, and I had the opportunity to meet with many chairmen, many CEOs of our clients and common theme I heard other than the economy there was the fact that a leader is really in the people business, and that's attracting, developing and retaining talent, and I wholeheartedly agree.

And that absolutely, from our perspective, reinforces our strategic direction.

Personally, I am extremely confident about Korn/Ferry's potential.

The environment clearly remains fragile.

I don't need to tell you that, but people have not been disintermediated, and there is a tremendous need for both the attraction and development of top talent across all industries and around the world.

It is clear to us from this quarter's performance that our differentiated strategy works and that we're well positioned to make and seize any opportunities in the marketplace.

With that, I would like to turn it over to my esteemed colleague, our CFO, Mike DiGregorio.

Mike?

Thanks, Gary, and good morning, everybody.

As you may have noted from the press release this morning, demand for our industry leading talent management services continues to recover across the globe.

As Gary noted, fiscal 2011 first quarter marks our fifth consecutive quarter of sequential growth with all of our operating segments sharply higher versus the same quarter a year ago.

On a constant currency basis, fiscal 2011 first quarter fee revenue grew by $8.9 million, or more than 5% sequentially and was up greater than 51% year-over-year, reaching $175.1 million.

In this still challenging economic environment, we are increasing market share and are outperforming the industry and our major competitors.

Despite the beginning of summer vacation seasonality, new business awards remain strong in the first quarter.

The number of newly awarded combined executive recruiting and leadership and talent consulting assignments in the first quarter were up almost 40% year-over-year to 1,890.

More importantly, profitability continues to rise with revenue.

Excluding all restructuring related charges and recoveries in prior periods, our consolidated operating earnings grew by $5.5 million, or 40% sequentially to $19.3 million with a 290 basis points improvement in operating margin to 11%.

On the same basis compared to the first quarter of fiscal 2010, first quarter consolidated operating earnings improved by over $26 million.

Our first quarter ending cash and marketable securities position remained strong at just over $232 million on a gross basis.

However, excluding cash and marketable securities reserved in deferred compensation arrangements and for previously earned and accrued bonuses to be paid, the current investable cash balance is approximately $114 million.

During our last earnings call, we announced that we had reinitiated our share repurchase program.

In the first quarter of fiscal 2011, we repurchased approximately 567,000 shares with total cash proceeds of $8.5 million.

Subsequent to the end of the first quarter and through yesterday, we had repurchased an additional approximate 157,000 shares with total cash proceeds of $2.1 million.

There are now approximately $24 million of previously authorized share repurchase funds remaining.

Finally, fiscal year 2011 first quarter earnings per share were $0.24 per share.

Excluding all restructuring related charges and recoveries in prior periods, first quarter EPS improved by $0.29 year-over-year and $0.05, or 26% sequentially.

Earnings per share have now improved for the fifth consecutive quarter.

At this point, I will turn the call over to Gregg Kvochak to review our operating segments in a little more detail.

Gregg?

Thanks, Mike.

Starting with our executive recruiting segment, consolidated first quarter executive recruiting fee revenue improved to $154.9 million, up $4.3 million or 3% sequentially and up $53.5 million or 53% year-over-year.

On a constant currency basis, Executive Search fiscal 2011 first quarter fee revenue was up over $6.2 million, or 4% sequentially and up $54.9 million or 54% year-over-year.

As previously stated, the number of newly opened combined Executive Search and leadership talent consulting assignments in the three months ended July of 2010 were 1,890, down approximately 1.8% sequentially but up nearly 40% year-over-year.

Sequentially, the Industrial, Financial Services and Technology Specialty practices grew the fastest and were up 9%, 5% and 5% respectively.

In the North American region, first quarter fee revenue improved $4.9 million ,or 6% sequentially and $34.7 million, or 63% year-over-year, reaching $90 million.

Sequential growth was strongest in the Industrial and Technology practices which were up 17% and 13% respectively.

Newly confirmed assignments in North America fell approximately 1.6% in the first quarter of fiscal 2011 versus the fourth quarter of fiscal '10.

Market conditions in Europe continued to remain stable in the first quarter with fee revenue of $36.3 million.

On a constant currency basis, Europe first quarter fee revenue was up $1.6 million, or 5% sequentially and up $9.9 million, or 34% year-over-year.

Nine of 19 individual countries grew sequentially in the first quarter led by the UK, which was up 12% sequentially.

On a specialty practice basis, the Financial Services and Industrial practices improved sequentially and were each up approximately 4%.

After a strong fiscal '10 fourth quarter, Asia Pacific first quarter fee revenue decelerated slightly to $21.1 million.

On a constant currency basis, fiscal 2011 first quarter fee revenue was off $400,000, or 1.6% sequentially but was up $8 million, or 65% year-over-year.

Five of 10 Asia Pacific countries grew sequentially, led by China which was up 11%.

The Technology practice continues to be an area of strength in the Asia Pacific region and was up 36% sequentially.

In South America, first quarter fee revenue was essentially flat sequentially.

Measured on a constant currency basis, South America first quarter fee revenue was down approximately 2% sequentially but up 67% year-over-year.

Five of seven individual countries were up sequentially led by Colombia and Chile which were up 17% and 20% respectively.

The total number of Executive Search consultants at the end of the first quarter was 478, up five sequentially and down 23 year-over-year.

The average fee per assignment was approximately $77,000 in the first quarter and was up approximately 5% sequentially and 11% year-over-year.

Annualized fee revenue production per consultant grew 7% sequentially in the first quarter to approximately $1.22 million.

Consolidated first quarter Executive Search operating earnings improved to $27.7 million.

Excluding all restructuring charges and recoveries in the prior periods, consolidated first quarter operating earnings were up $22.6 million year-over-year and up $4.5 million, or over 19% sequentially.

The consolidated Executive Search operating margin was 17.9% compared to 5% in the first quarter of fiscal '10 and 15.4% in the fourth quarter of fiscal '10.

Now turning to Futurestep.

Fiscal first quarter fee revenue grew for the fifth consecutive quarter reaching $20.2 million.

Measured on a constant currency basis, first quarter fee revenue was up 15%, or $2.7 million sequentially and up 31%, or $4.8 million year-over-year.

Geographically, sequential constant currency growth was 24% in Europe, 17% in Asia Pacific and 15% in North America.

Futurestep's profitability also sharply improved in the first quarter, driven by the combination of strong top line growth and ongoing cost control initiatives.

Compared to the fourth quarter of fiscal '10, Futurestep's operating results improved nearly $2 million from a loss of $1 million to an operating profit of $990,000.

Futurestep's operating margin was 4.9% in the first quarter.

Now, I will turn the call back over to Mike to discuss our outlook for the second quarter of fiscal 2011.

Thanks, Gregg.

Recent monthly new business trends around the world have been relatively stable with July and August new awards in North America and Europe as expected, given the usual slowing effects of summer vacation seasonality.

The dollar amount of consolidated Executive Search and leadership and talent consulting new business awards in August were up 5% over July.

We also recognize that the strength and pace of the economic recovery around the world remains a bit fragile and uncertain, and we cannot predict the impact of these conditions on future new awards.

Assuming near-term stable economic conditions and factoring in the impact to our current backlog of seasonally weaker new business awards in recent months, fiscal 2011 second quarter fee revenue will likely range from $165 million to $185 million and earnings per share will likely range from $0.20 to $0.27 per share.

This guidance assumes foreign exchange rates remain at or near current spot rates for the second quarter.

That concludes our prepared remarks.

At this point, we would be glad to answer any questions you might have.

(Operator Instructions) Our first question comes from the line of Kelly Flynn with Credit Suisse.

Your line is open.

Thanks, I just have a couple questions.

So, first question about the European revenue trend.

I know, because I think I ask you this question every quarter, that you don't like to break out the organic growth in the Whitehead Mann contribution, but obviously, that annualized.

So, can you just give us a sense of whether or not you are actually seeing an organic growth slowdown?

And you did give some country by country commentary, but any more notable comments about which countries you're seeing particular strength and/or slowdown in?

Thanks.

Let me start.

This is Mike.

Let me start by just saying that as you recall, last year in the first quarter, that acquisition happened approximately mid-quarter.

So, clearly on an incremental basis, we got the benefit of an extra 40 days this year compared to last year, so we did have some additional business.

But even on a constant basis effectively on an apples-to-apples basis, we did have increases.

Gregg, do you have some numbers you can reference?

Yes, we quoted already, but in the UK on a sequential -- sequential growth was 12% for the UK, but that's of course apples-to-apples, and there aren't any acquisitions, of course, in the first quarter versus the fourth quarter.

Yes, I was just trying to get a sense of the year-over-year organic growth.

Year-over-year, in the first quarter last year, we got about approximately $5.8 million from the Whitehead Mann acquisition.

And if you look at the first quarter of this year, it is about $11.5 million.

Okay, all right.

That's really helpful.

Thanks.

And then another unrelated question.

Can you talk about the financial services industry?

I guess just update us on what percentage of your mix that is and maybe just comment on how some of the headlines about trading volumes and generally weak trends across this segment of the industry that I work in, that you may -- how that may fit with what seemed to be some pretty bullish comments about assumed continued momentum in your revenue trends?

Basically, are you assuming a fall off in the business, especially the financials business as the year continues?

First of all, overall, we have actually seen very steady constant improvement in that sector, so it has been a very strong overall.

In terms of specific numbers, do you have some numbers, Gregg, you can quote there?

Well, in the quarter financial services about 21% of our overall business.

That percentage, of course, has been improving over the last four quarters for us.

If you go to the subsector details sequentially where we're seeing the strongest growth, it's actually in the asset management and capital markets area.

Okay.

And are you seeing any early signs of a slowdown as we move through the fall, or do you feel like that's still--?

Well, overall, it remains relatively stable, but it is a challenging environment.

And again, it is one, no question with what's going on in macro markets, it is likely to remain a little challenging.

Okay.

And then finally, could you give us a year-over-year growth in revenue by month for the quarter?

Basically, what was the year-over-year growth for each month in the quarter?

That's not something we typically give because you also have factors in terms of number of business days that change by year, so I think looking at that might -- is not necessarily helpful.

But looking at the quarter as a whole I think is probably a better indication of how business is performing.

Okay.

That sounds good.

Thank you very much.

(Operator Instructions) Our next question comes from Mark Marcon with R.W.

Baird.

Good morning.

Just wanted to follow up on Kelly's question first.

As it relates to the financial services side, in terms of the guidance, what are you assuming out of that practice, both out of the UK and North America?

Are you assuming that that's going to hold stable, or are you presuming that that probably does fall off a little bit?

In generally speaking that the overall assumptions, based again on orders that have come in so far, is essentially in line with overall performance that we're seeing, and our overall guidance for the quarter.

And so basically, you're just assuming that it is going to remain stable in that particular subsector?

Yes.

And then with regards to the differentiation and the success that you're seeing there, can you give us, Gary, a little bit more color with regards to how you're seeing the differentiated strategy working?

And can you give us also a little bit more color about the total leadership services?

Because it looks like it is up to 25% of your overall business.

Wondering if there is any additional detail that you can provide in terms of the improvements that you're making on the profitability of the consulting side, et cetera?

Yes, that's -- good morning.

Just a clarification.

The leadership and Futurestep businesses combined--.

Right.

-- are 25% of the organization.

Understood.

But the leadership business has made remarkable strides.

I think back six years, and it was $8 million assessment practice.

And in the quarter, we did $23 million, which is $95 million or so annualized assuming that trend can continue.

So, that's remarkable progress.

And you look at that and some of that has been acquisitive and some of that has been organic, and the solutions and services that we have now we have been carefully building out.

Whether it's enterprise learning or succession planning or executive education, training and development, alignment.

And then we have got a products business, too, that falls within there, so I am very, very proud of where we are and what we have achieved.

And what I see from clients in terms of talking to clients is real reception for a broader conversation, a more consultative approach and our go to market strategy, which is our first of our five strategic initiatives is absolutely embedded in that.

So, if you look at our managed account global account program today, it represents about 16% of the firm or so.

We want to see that to be 25%.

You have got well over 50 clients who are managing globally with many people touching those accounts.

And on a great number of those accounts, we're not only doing search, but we're doing leadership.

We're doing outsourced recruiting, so we're really starting to see it come together, Mark.

I think that candidly, we have got a ways to go and for me, that implies more opportunity.

In terms of your questions around guidance and financial services, it is clearly -- it's an uncertain time.

And if you're a CEO and you're thinking about levers of growth, there are not many to pull, right?

You can either look to the east or you can innovate, you can do M&A.

So, I recognize the kind of fragile environment we're in, and our assumption is that there is no marked deterioration from this point forward.

And if you look at our new business that was awarded in August, which is a highly cyclical month, what you find is that North America was actually better in August versus July.

Europe was obviously weaker, which again, you would expect.

That comment, with regards to in North America, August being better than July, that was specific to financial services?

Broad-based.

Overall.

Total.

And I think both Kelly and I share the same point of view in terms of where our industry is relative to where it was.

I get that.

I can read that loud and clear.

So, we're on the ground floor, and there is obviously a lag in terms of when decisions -- when things change on the ground and when decisions get made to add or adjust.

And you have always been on the front end in terms of making adjustments and having foresight, so I am sure you will make adjustments as it becomes necessary.

On the flip side, the leadership side, seems like it is really expanding nicely.

How should that track through the balance of this year?

Well, we're not -- look, given the comments that you've just made, we only guide out quarterly.

I just meant, you have clearly improved that business and if the rest of the world stays stable, and talking about ex-financial services, if that stays stable, then how -- you have clearly improved the capabilities, so it must be on an upward trajectory.

Well, we would like to think so, but again, you're in an environment that is somewhat directionless, right?

In terms of the global economy, and I don't think one should think that these kinds of services are immune from that, right?

But I think in terms of your -- if you're sitting here today assuming that things are going to continue like they have progressed over just the last few months, then you would have to have the expectation and goal that the business would increase for sure.

Now, if there is a change in the overall economy, I just don't think it is practical to say we can deliver on that.

And can you talk a little bit about the -- you have had a number of high profile hires recently from some of your other brand name competitors.

Can you talk a little bit about to what extent the cost of all those people was fully reflected in the salary and benefits from this past quarter?

And is there any expectation that we should have in terms of seeing that change in terms of the ratios that we're currently seeing, or how should we think about that?

Well, it is -- the life blood of our firm is not just hiring, but developing people, so you don't see all the stuff we're doing in terms of developing our colleagues around the world.

You look at the ending consultant headcount and it is 478, up a little bit from -- up five, actually, from the fourth quarter.

Our comp ratio is 68.6%, our G&A ratio is about 18.7%, and over the last several quarters, those fluctuate up and down, give and take.

In terms of our guidance that we are providing, assuming that the world doesn't change here, we have factored the cost of that into that guidance.

Mark, if I can add to that, I think the one thing we've repeatedly said as well is we have an ongoing program, very diligent to reduce and cut and take out costs of the business to be able to fund some of that, and I think you have seen that.

We have actually -- as you know, we have actually added a lot of people on a gross basis over the last few quarters, but we have also continually taken out the less productive performers, and that's part of our ongoing strategy.

I think any good business does that on a regular basis.

That's how you balance and control your total costs.

You have done a great job there.

I will jump back in the queue.

Thanks.

Thank you.

Our next question is from the line of Toby Sommer with Suntrust.

Thank you.

I had a question about Futurestep.

I wondered if you can give us color as to what the drivers of growth were sequentially and remind us about the seasonality?

Is that July quarter usually a strong quarter or maybe a little softer because of the summer timeframe?

I think that one thing we have seen kind of historically is that there has been a little bit of a lag in the recovery in that sector compared to the executive search, and I think that's exactly what we have seen again over the last few quarters.

We saw the high-end search take off a little bit, and we're now seeing the Futurestep that delves a lot in the middle market recovering.

So, it is fairly similar to what we have seen historically.

And I think we have also got a new leader in the business, and the prior CEO did a great job, and we have got new leaders come in and is building on that and working very hard for the team.

So, I think they get a lot of credit for the growth.

So, was it broad based, or were there some unusually large business wins in the quarter that propelled the growth?

It was fairly broad based overall.

We saw growth in, I think all regions pretty much, which is really very important.

Because in the past, a lot of that growth has been somewhat, let's say disproportionate with the Asian market, and this is a great sign that we have seen it actually very positive all around in all three major geographic regions.

Thanks.

The operating margin, 11% in the quarter, very impressive.

Was that a pure number?

Because the incremental margin from the April to July quarter was very high, just want to make sure there was nothing else in there.

No.

There were no unusual items per se, as we've said before.

Obviously, we expect decent incremental growth as the top line grows.

Obviously, we get some leverage out of the fixed costs and we have some incremental variable expenses.

But I think we have said we have seen historically, you see maybe about a third, 25% to somewhere -- 25% to 35% of incremental revenue in our model should drop to operating profit.

And it's been -- I think we have demonstrated that consistently.

And then two other kind of modeling questions in the quarter.

The interest and other line turned negative in the quarter.

If you gave some color on that, I apologize because I missed it.

Could you describe what transpired in there?

Just to add to what Mike said earlier, if you remember, Toby, with our -- primarily our E-cap program, which is the deferred compensation program we have for our consultants and senior executives here, we record gains or losses on the P&L, both above the operating line and below the operating line.

So, in particular, this quarter where the stock market actually fell, there was basically a $1.4 million benefit above the line.

But it was -- in compensation expense, but it was offset by $1.5 million recorded loss below the line, so basically, they wash almost one for one pretax.

Okay.

So, does that influence the 11% operating margin and somehow make it a little bit higher than it might otherwise be?

It would.

If you do the math, $1.4 million on 175 would be about 80 basis points.

Tough margin, but still with considering that the margin growth was quite nice.

Absolutely, absolutely.

And then among the question going forward, is the -- what should we expect for a tax rate in fiscal 2011?

Well, again, the first quarter tax rate is based on estimates that we have made for the year, so we were looking at it right now probably around 38.4%, 38.5%, approximately.

Okay, perfect.

And then Gary, one last question for you, and I will get back in the queue.

The move that you had in CEO and Board searches, that 80% growth, very impressive.

I was wondering if you could give us some color on what sort of growth you might see in the market.

In other words, is that 80% above market, and is that being driven by some sort of mix shift in your consultant base?

Or whatever other color you could give to describe that would be great.

Yes.

It is tough to do, because that part of the overall business community is such kind of a fragmented market.

It is really tough to give objective data there that I could point to, to real fact.

I would only say that of our five strategic initiatives, one of them clearly is to not only extend the brand, make the brand more elastic, but elevate it, and elevate the type of work that we're doing.

Start in the corner office, start in the C suite and cascade down.

And that takes, to move an organization, that takes a considerable period of time, and I do think that that is an opportunity for Korn Ferry in the future.

And so it is a very conscious effort, but for me to assert that we're taking market share, anything like that, I think would be -- just wouldn't be wise.

But I would say that I am very pleased with the progress of our CEO and Board team and again, you have got a whole host of leadership services and solutions that help to play in that as well.

Thank you very much.

Thank you.

We go back to the line of Mark Marcon.

Gary, wanted to ask you a little bit about the cash that you currently have.

First of all, it was nice to see that the Board went with your recommendation to buy back stock, so clearly that's one of the uses of capital.

But how else are you thinking about capital and are there other areas that you would like to continue to expand in?

Or do you feel like we have made Whitehead Mann, we have made a few other initiatives and now we need to digest those?

Well, we have done -- I think we have done, Gregg, seven acquisitions or so.

Yes.

Geographically speaking broad based, I think that we are everywhere that we want to be.

I think there is some opportunity for us in Africa, but that's a ways away, but I do think there is some geographic opportunity there.

But I look at the Futurestep and leadership businesses and think about what we can do there.

In the Futurestep business, what we can do to create greater scale, greater capacity around this RPO offering, that is something that we have a desire for.

Within the leadership business, I think that we need much greater scale and capacity in Europe and Asia.

I think in North America, we have been at it a little bit longer, but I think in both of the other geographies and Latin America, there is enormous opportunity there for us.

So, as we think about investments, that's kind of where our orientation is.

More towards Futurestep than the leadership side?

No, no, no, both of -- just -- no.

Both of them we're looking at.

Okay, great.

And then can you talk a little bit about, this is just a short-term question, but just the -- what was the bonus accrual for the quarter?

$32 million.

Great.

And then as we look out in terms of the monthly trends, can -- you mentioned that August was up 5% relative to July.

How does that compared to what you normally end up seeing?

I think last year, Mark, August was also better than July across the board, but in years past, August has been definitely a slower month for us.

Typically down slightly in the past historically.

That was my recollection, but I just wanted to confirm that.

And then finally, on the fee for search, clearly making nice progress there.

And you have clearly elevated the brand over the last few years, and you're bringing on these high profile folks.

On a like for like basis in terms of if you're getting the same type of assignment, are you seeing the fee per search go up?

Or how should we think about the trends on a like for like basis?

No, comp is -- no, absolutely not.

That's one of the issues.

It's -- I think that the caliber of the organization overall in totality today is so much stronger than it was two years ago, yet when you look at the average fees, today it is $77,000.

We had seen fees $93,000.

That difference on 6,000 searches a year is enormous and an enormous leverage to the P&L.

So, no, if you look overall, basically with -- in the C suite with executives, Asia compensation trends generally are up 10% or so.

North American executives could expect to be down 10%, and Europe is neutral to slightly down.

So, the other thing, too, I want to make sure when we -- you said August new business, that was North America, right?

So, August new business in North America was better than July.

In Europe it was lower in August than it was July, which is what you would expect.

Understood.

Great.

Thank you very much.

It appears there are no further questions, Mr.

Burnison.

Okay, well, thank you very much for participating in this call.

Obviously, we are very proud of our organization and continuing to build the Company that creates long-term sustainable value for shareholders.

It is certainly hard to predict the -- where the economy is going to go, but our orientation has always been to seek opportunity in any kind of market and preserve the brand and position the Company for growth and accelerate through these economic turns, and that's what we're doing.

So, again, thank you very much for your time, and we'll talk to you again.

Ladies and gentlemen, this conference will be available for replay for one week starting today at 12 noon PM Eastern Daylight time and running through September 15, at midnight.

You may access the AT&T executive playback service by dialing 800-475-6701 and entering the access code of 168109.

International participants may dial 320-365-3844.

Additionally, the replay will be available for playback at the Company's website, www.kornferry.com in the investor relations section.

Thank you for your participation.

You may now disconnect.