Korn Ferry (KFY) 2012 Q1 法說會逐字稿

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 the presentation today, such as those relating to future performance, plans, and goals, will constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Although the Company believes the expectations reflected on 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 in the Company's annual report for fiscal 2011 and in the other periodic reports filed by the Company with the SEC.

Also, 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 direct comparable GAAP financial measure contained in the release relating to this presentation, which is posted on the Company's website at www.kornferry.com.

With that, I'll turn the conference over to Mr.

Burnison.

Please go ahead, Mr.

Burnison.

Thank you and good afternoon, everyone, and thank you for joining us.

Today, we reported our ninth consecutive quarter of sequential growth.

It was driven by almost every market sector and line of business that we're in.

Fee revenue was about $206 million.

It was up 5% sequentially and 18% year-on-year.

Our margin, our operating margin, was 12.5% and our balance sheet remains pristine.

During the quarter, our flagship search business grew in all regions, posting 14% growth over the prior year.

And Futurestep, our outsource recruiting unit, posted our largest advance and that was up 49% year-over-year and that was driven by growth in all regions.

In fact, Futurestep, over this past 12 months, has doubled its outsourced recruiting RPO and project business; pretty impressive.

Without question, when you look around the world today, its sovereign nations and its companies alike, they are continuing to struggle and rationalize to the new normal in the global economy.

Given our results and given this backdrop, to me it shows that this differentiated strategy, this exceptional service to clients, this focus on intellectual property, and differentiating our firm and extending and elevating the brand, that it's working.

That it's being executed and delivered by colleagues who I, quite frankly, think are the absolute best in the industry.

Despite the volatility and uncertainty that surrounds the world today, this firm is pushing forward to create a Company that really serves as the bridge between our clients' business strategy and their talent strategy; in other words, between their desires and their outcomes.

We're driving an organization that delivers a solutions-based go-to-market approach.

Our intent's not simply to fill a client's needs as they arise, but rather to aid them in developing talent strategies that's going to give them the competitive edge.

We want to own the talent agenda of our client.

Korn/Ferry is absolutely elevating and extending the brand at the top of the house.

Our Board and CEO practice, our leadership and talent consulting practices, they continue to generate strong revenues and momentum.

If you look today, 60% of the Fortune 100 are utilizing some portion of our leadership consulting offerings.

Better than a-third of the Fortune 100 are actively using Lominger solutions.

We're going to continue to build awareness for our solutions in the Boardroom, in the C-suite and in the senior HR communities.

These all represent, obviously, an important constituency to make the brand more elastic and to expand awareness for our broad offerings.

As we strive to own the talent agenda of our clients, we're going to remain steadfast in pursuing opportunities along the broad HR spectrum.

We'll continue to make investments to differentiate this professional services business.

Over the past several months, I had the opportunity to travel extensively throughout Asia, meeting face-to-face with many clients and many of our colleagues.

Although the challenges of the East are vastly different to those of the West, it's remarkable the similarity shared among global CEOs with regards to talent.

It doesn't make any difference whether it's the widget manufacturer or the technology developed or the financial instrument sold, the job of a global CEO is less about the product and all about the people.

I would argue that the war for talent hasn't died, it's just changed identity and location.

It's clear to me, from our performance over the last several quarters, that indeed our differentiated strategy is working.

And we're going to continue to seek out opportunity from the volatility that has enveloped this world.

Moving forward, the outlook for just about any business, for our clients, is less than clear.

Yet regardless of the season, Korn/Ferry's going to continue to navigate the environment that's around us, and push to build a Company and a brand that's synonymous with talent management.

Most importantly, by assisting our clients in linking their business and people strategies.

With that, I'll stop with my prepared remarks and I'll turn it over to our CFO, Mike DiGregorio.

Mike?

Thanks, Gary, and good afternoon, everyone.

Despite continued volatility in the financial markets and a deceleration in the economic recovery around the world, overall demand for our world-class recruiting and talent management consulting services remains strong in our first fiscal quarter.

As Gary said, the first quarter of fiscal '12 marks our ninth consecutive quarter of sequential growth in fee revenue.

And with fee revenue of $206.3 million, it is the second highest quarter of fee revenue in the Company's history.

Year-over-year, our first-quarter consolidated fee revenue was up over $31 million or nearly 18% and on a sequential basis, was up $9 million or 4.5%.

On a constant currency basis, the firm's first quarter fee revenue grew by 10% year-over-year and was up 2% sequentially.

Year-over-year, new business trends were up 4% in the first quarter with a number of newly opened combined executive search and leadership and talent consulting assignments reaching 1,965.

Sequentially, the total number of newly opened assignments fell approximately 8%, not uncommon in our fiscal Q1 due to the initial impact of the summer holidays.

Fiscal '12 first quarter operating earning trends also remain strong.

Despite selected expenditures in the quarter, targeted largely at near-term growth, our fiscal '12 first quarter operating earnings remained flat sequentially at $26 million with a 12.6% operating margin.

As previously disclosed, fiscal '11 fourth-quarter operating earnings have positively benefited from a $2.2 million contingent consideration credit associated with a prior acquisition.

Compared to the first quarter of fiscal 2011, consolidated operating earnings improved by $6.7 million, or 35%, with an operating margin improvement of 160 basis points in the first quarter.

Additionally, all of our operating segments and geographic regions achieved improved profitability year-over-year in the first quarter.

Turning to the balance sheet, our first quarter ending cash and marketable securities balance was $281 million, down $88 million sequentially due primarily to the payment of fiscal year '11 cash bonuses during the quarter.

Excluding cash and marketable securities reserved for deferred compensation arrangements and for accrued bonuses, the current investable cash balance is approximately $170 million, which is flat with the fourth quarter of fiscal 2011.

Finally, fiscal '12 first quarter diluted earnings per share were $0.33 per share, an increase of $0.09 or 38% year-over-year.

At this point, I'm going to turn the call over to Gregg Kvochak, our Senior Vice President of Finance and Investor Relations, who will review with us the operating segments in a little more detail.

Gregg?

Thanks, Mike.

Starting with our executive recruitment segment, consolidated first quarter executive recruiting fee revenue was $176 million, up $4.2 million or 2.4% sequentially and up $21 million or 14% year-over-year.

Fiscal '12 first quarter growth was broad-based with all of our operating regions up both sequentially and year-over-year.

On a constant currency basis, executive search fiscal '12 first quarter fee revenue was up $1.2 million, or 1% sequentially, and up $11.6 million, or 7% year-over-year.

Sequentially, fee revenue growth in the life sciences healthcare practice up 11%, the consumer goods practice up 5%, and the industrial practice up 6% were offset by weakness in the financial services and technology practices.

In the North American region, first quarter fee revenue improved approximately $1.5 million, or 1.5% sequentially, and $8.4 million, or 9.4% year-over-year, reaching an all-time high of $98.4 million.

Sequential growth in the life sciences healthcare practice up 13% and the industrial practice up 6% were offset by weakness in the consumer goods, financial services, and technology practices.

Newly confirmed assignments in the North American region were down 6% in the first quarter of fiscal '12 versus the fourth quarter of fiscal '11, but up 10% compared to the first quarter of fiscal 11.

Despite the beginning of the summer vacation season, Europe's fee revenue was stable in the first quarter.

At actual rates, Europe's fee revenue grew $1.2 million sequentially in the first quarter, reaching $43.2 million.

On a constant currency basis, Europe's first quarter fee revenue was up $100,000 sequentially and $1.9 million, or 5%, compared to the first quarter of fiscal '11.

11 of 17 countries grew sequentially in the first quarter led by Switzerland, Italy and Germany which were up 67%, 38%, and 11%, respectively.

On a specialty practice basis, the consumer goods and technology practices improved the most sequentially and were up by approximately 23% and 5%, respectively.

Market conditions in Asia Pacific were also stable in the first quarter with fee revenue reaching $25.7 million at actual rates.

On a constant currency basis, fiscal '12 first quarter fee revenue was up $200,000 sequentially and was up $2.1 million, or 10% year-over-year.

Sequential fee revenue growth was achieved in 6 of 11 countries in the first quarter with strength in Australia, Japan, and China.

On a specialty practice basis, growth in consumer goods up 19%, industrial up 11%, and technology up 19% were offset by weakness in financial services.

At actual rates, South America's fiscal '12 first quarter fee revenue was up 5% sequentially and 17% year-over-year.

Measured on a constant currency basis, South America's first quarter fee revenue was down approximately $450,000, or 5% sequentially, and essentially flat year-over-year.

The total number of executive recruiting consultants at the end of the first quarter was 474, up 3 sequentially and down 4 year-over-year.

Annualized fee revenue production per consultant was up 3% sequentially in the first quarter to approximately $1.4 million.

Consolidated executive search operating earnings improved by $4.9 million, or 16% sequentially, and were up approximately $7.9 million or 28% year-over-year, reaching $35.6 million in the first quarter.

The consolidated executive search operating margin was 20.2% in the first quarter compared to 17.9% in both the first and fourth quarter of fiscal '11.

Now turning to Futurestep, which grew for the ninth consecutive quarter and generated fee revenue over $30 million for the first time since the fourth quarter of fiscal '08.

In the first quarter, at actual rates, consolidated Futurestep fee revenue grew over 49% year-over-year and over 19% sequentially, reaching $30.2 million.

Measured on a constant courtesy basis, first quarter fee revenue was up $6.2 million, or 31% year-over-year, and up $2.8 million or 11% sequentially.

Geographically, sequential growth was strongest in North America, up 27% and Europe where constant currency growth was 7%.

Futurestep's profitability also strengthened in the first quarter.

Sequentially, Futurestep's operating earnings grew approximately $790,000 with a 160 basis point margin improvement to 7.6%.

Compared to the first quarter of fiscal '11, Futurestep's fiscal '12 first quarter operating earnings improved $1.3 million, or 133%, with a margin improvement of 270 basis points.

I'll now turn the call back over to Mike to discuss our outlook for the second quarter of fiscal '12.

Thanks, Gregg.

Historically, the second quarter of our fiscal year is our most seasonal quarter, as I think you know, due primarily to slower new business awards during the summer months.

So far, early in the second quarter of fiscal '12, consolidated new business awards have trended at a pace in line with our expectations.

August executive search confirmations were flat compared to July in North America and down approximately 30% in EMEA.

Given the uncertainty caused by the global economy and the financial markets, it is currently more challenging to accurately forecast business results.

However, assuming that economic conditions, financial markets, and foreign exchange rates do remain reasonably steady, fiscal '12's second quarter fee revenue will likely range from $192 million to $210 million and earnings per share will likely range from $0.30 to $0.36 per share.

With that, we conclude our prepared remarks and of course would be glad to take any questions you may have at this time.

(Operator Instructions) Tim McHugh.

Yes, first I want to ask about the financial services practice -- you mentioned it was one of the areas that was down sequentially.

Can you just talk about late in the quarter and what you've seen in August?

How weak has that area been and just a little bit more color on what you're seeing?

I'd say that first of all financial services is about 17% of the portfolio.

Something like that.

We have a pretty balanced portfolio.

August is a very tough month to read into.

I would point you back a year and say that there was a great deal of over hiring coming out of the great recession, so I would say that last year there was quite an extraordinary ramp.

Sequentially, if you look, it's off about 10% or so and year-over-year, that would be off about 9%.

But it's really tough to make a read into August, to try to extrapolate any further.

Okay.

And then, can I ask about the expenses?

You mentioned some planned investments and near-term opportunities and then also, is that what is in the corporate expense line, which was much higher than normal?

Yes.

There were a variety of expenses there.

So corporate expenses are up compared to the prior period.

The most significant ones we've seen are increases in our -- we've had some consultative professional fees, we had some exchange losses in the quarter versus some gains in prior periods, and we also had some investments in costs related to social media development and new business development expenses as well.

Would you expect those to continue or were those one-time into this quarter?

Some of those were timing-related.

The rate of spending -- clearly a couple things, one, we definitely plan to continue to invest in the business.

We still see this as a growing business overall.

So clearly plan to develop.

Some of it is timing, things like exchange rates, as you know, historically move around.

So typically what we've seen in the past where we have periods of exchange losses, they have typically swung back and you may get some gains.

There's no guarantee of that, but some of that has to do with the timing and movement.

You've got a variety of factors.

We also have ongoing, as always, cost reduction programs.

We're trying to reduce expenditures in a variety of areas.

So, I think there's some opportunities to do better in terms of overall expenditures.

I don't think we'll necessarily return to year-ago levels in the short-term, but I do see some opportunity for improvement.

And then, my last question would be on the hiring side.

I think last call you talked about selectively looking for opportunities, more so in Asia and in parts of Europe, maybe.

Can you update us on your thoughts there?

Have you pulled back at all on those given the more uncertain environment?

We only guide out quarterly, so we don't -- I would say that our view when it comes to hiring really hasn't changed since the last call.

Okay, thank you.

Kevin McVeigh.

Mike, thanks for the color on the quarter.

Just to follow-up on the question, looks like there's about a $0.10 impact relative to what I was looking for from the FX swing in corporate.

As you think about apples to apples guidance for Q2, are they not in the guidance?

What type of corporate expense line item should we look for?

And when you think about the other line, what are you modeling in there?

Again, as we said, our guidance essentially assumes relatively stable market.

Again, while there's clearly, we believe, there's some timing of expenditures and some opportunities to reduce, it's hard to absolutely predict given the volatility of the markets.

But we've assumed relatively stable markets.

Okay.

But again, on the corporate line that was $12 million, I think, what are you modeling for Q2 on that line?

Again, I think there's some opportunities to bring that down somewhat.

I don't think we will return to previous levels.

Remember, again, some of the prior periods in Q4 we benefited from some credits that we had previously announced.

So, some of the last quarter's overall corporate expense numbers were somewhat, call it, artificially low by those credits.

Again, I do think there's some opportunity for improvement, cost reduction, some timing, and so yes, we could see some improvement, but don't necessarily see it returning to some of the prior levels as the business grows.

Got it.

And then, I feel like we could have gone back a year ago and there was a lot of concern about Europe and so on and so forth and sovereign debt, almost like a repeat of the playbook, it feels like.

As you think about the business, is it trending in a similar way or from a fundamental perspective, does it feel a lot like last summer?

A little weaker, stronger?

Gary?

Last summer was generations ago, so I would say that the level of new business that we saw in August was actually right in line with our expectations.

Europe was obviously down sequentially, as we expected.

North America was flat, which again was what we were anticipating.

And as we start out September, it's early days, but the North American business, in terms of new business, is exactly as we would expect.

Great.

I don't know if you said this, Mike, the buyback in the quarter, if you did any, number one and then, number two, given where the stock is and the amount of cash you have, how are we thinking about that going forward?

Again, we really look at it, as we talked before, as total cash opportunity and so we look at that together with the possibility of new business development expansion through acquiring business.

We're looking at that collectively and continue to evaluate opportunities.

Didn't do any buybacks recently, but continue to evaluate those together with other opportunities for investment.

Great, thank you.

Tobey Sommer.

Was wondering if you could, Gary, if I could get your thoughts on what the role is of social media for the business?

I could see how it could be a tool, but also how it could potentially be a threat as well.

Thanks.

For the firm overall, our goal is to make this brand synonymous with talent management.

And part of that, given where the world's headed, is to own the language of talent online.

So strategically, we see an opportunity in several different ways.

One is to help a Board, held a CEO develop a work force.

And so, we think that we can create, through social media, an opportunity to give tools to both clients and to executives, tools and resources that will further their careers.

That's an opportunity for us.

Secondly, there is an opportunity to use it to make our core recruiting processes more efficient.

So, we're actively going down that path as well.

When you talk about a threat, we believe that the search business, that the key here is to continue to differentiate it, to continue to surround it with intellectual property, and continue to operate at the top of the house, elevating and extending our brands.

As you go down lower in an organization, certainly the way people get jobs are changing.

But we think that our strategy addresses both the threat, but more important, we see it as opportunity.

Thank you.

You touched on the seasonal decline in new engagements and geographically that being in line with expectations.

How about the seasonal uptick?

What would be normal either in Europe or in the US for the October quarter on a sequential basis compared to the July quarter?

We would expect to see probably a 10% or so lift from, let's just call it August levels of new business.

It's spread across the geographies comparable type increases?

Again, on a 40,000 foot level, I think that's a reasonable guesstimate.

Obviously, Europe's going to be a little higher because August is going to be much slower than it was, say, in July in Europe normally.

But that's in the ballpark.

Okay.

And then, were there any impacts from the investments that hit the Company's P&L that you could explain to us?

No.

Honestly, in the quarter, no significant impact.

Okay.

The net effect of all that is not significant.

Thank you.

And then my last question on the business development expense, is that related to some sort of unconsummated deal you were working on or something like that?

Some of it related to exploratory professional fees and the exploratory realm of opportunity.

Some of it was marketing-type expenses, so it was a combination of factors, yes.

Gary, could you update us on your thoughts on what the market looks like given this economic uncertainty?

Are seller's expectations adjusting with the news flow?

We would hope so.

We would hope so.

We've been very, very consistent.

We have to continue to find those solutions, those services, that intellectual property that really, truly differentiates this professional services business.

And the game plan hasn't changed.

We're always looking and we're very discerning, I would like to believe.

So we'll continue that.

Thank you.

Mark Marcon.

First of all, congratulations on the strong results given the environment and particularly it's nice to see the Futurestep come through after all the years of work.

Can you talk a little bit about Futurestep just in terms of when we take a look at it sequentially, where there certain contracts that this kicked in?

Any really large ones?

Any noticeable ones?

How should we think about that?

Mark, thank you for your comments.

I'm proud of our board and CEO work and when we're elevating the brand and all that great stuff, but I've got to tell you, that the team at Futurestep has really done a remarkable job over the last 18 months or so, and I would point to our leader of that business, it certainly starts there.

But I think we've, as a team there, we have done a few things.

We've taken the intellectual property and tried to incorporate it into that offering.

We have tried to inject it with technology as well.

And we have a real strategic focus on the consultative-type work, so the RPO work and the project-based work, and we've alluded to the fact, historically, that we really needed to find some anchor tenants, anchor clients to partner with and really serve their needs, and I believe that the combination of those things are paying off for us.

Do you have any detail in terms of specifically what --

Obviously, I can't talk about specific clients.

But largely, what we said is that the combination of the RPO business, the project business, the outsource recurring, that's doubled in the last 12 months.

When you look at that business mix now, and you guys can tell me if I'm wrong, please do, but I think about 30% of it or so, 35% comes from single kinds of transactions -- we call that markets business but single searches.

The rest is all the consultative stuff we are talking about and that is a far change in the portfolio from say a couple years ago.

That's helped to fuel the success.

There obviously are some anchor clients that we're partnering with in that business.

I think we're doing a very good job for those clients.

But we did in fact -- we've announced several new contracts in the last 6 months so clearly, in the quarter, we did benefit from some incremental revenue on those contracts; Cummings being one.

But in addition, we've also seen some of those initial contracts turn into expansion phase projects of increased business with the same ones as well, so a combination of both.

Great.

That's terrific progress in terms of getting the single searches down to 30%.

Sounds like the ratio is a mirror image of where was a few years ago.

I think that's right and Mark, these guys said it's really like 35%.

But it's still, directionally, what you said is true.

And the other thing that's important is although the absolute margins are still low and that much lower in that business, the incremental margins, if you look at flow through again, the incremental profit related to incremental revenues, because there's important fixed cost base there, once they start ramping up and leveraging the incremental margins are double-digit and very strong contribution to our performance.

Great.

And then, as you look towards -- in terms of the guidance and obviously, there's lots of moving pieces around the world, in terms of the guidance, are you presuming the same level of growth in Futurestep?

And how should we think about the various geographies?

Let me try to do it simply.

The low end of guidance assumes that the level of new business in August will continue for the next couple of months.

The middle of the guidance essentially assumes that new business returns to pre-August levels.

And the high end of guidance would be obviously better than that, with the key being probably Futurestep and North America.

In terms of North America, is North America roughly 17% financial services?

On a consolidated basis that's true and I would say probably that's true.

Right, Gregg?

Yes, that's true.

Okay.

Great.

And you were asked this a couple of different times, I hate to beat a dead horse, but in August, you gave us the sequential trend.

What was the year-over-year change in terms of the orders?

I know it was in line with your expectations, but --.

Again, I'd say 1 month does not make any kind of trend, right?

And you know the environment's very difficult to predict.

We seem to be all talking ourselves into a recession.

People can't agree on when the president is going to speak.

It's very difficult.

But to answer your question, if you look at August new business and take Europe this year versus last year, it's basically the same.

If you take North America this year to last year, it's down just a little bit.

And that would be primarily driven by financial services, I would imagine?

Yes.

Yes, that's exactly right.

Okay.

And in terms of your trip to Asia, can you talk a little bit about bringing additional talent to your platform?

What were you able to accomplish over there from that perspective?

We do this so that we can see a lot of our clients and continue to build the brand and extend the brand.

Our business too, like any CEO, is dependent upon talent, and we hope to continue to make inroads in bringing talent into our organization.

And as importantly, Mark, growing the talent from within.

And that's probably as far as I would go.

Okay.

And then the last one for now, you did a great job in terms of managing through the last downturn.

Obviously none of us wants a downturn to occur, but if we were to go through another one, how should we think about margins and profitability?

Do you think if we take a look at the last time that was probably a reasonable way to think about it?

Or how should we think about it?

Well again, we seem to be feeling -- everybody seems to be feeling the talk of talking the economy into a recession.

Not trying to.

But it comes up, obviously, with a lot of investors, Gary.

We've been through numerous cycles together.

We obviously are doing that as well.

We have to anticipate -- we've said as a stated goal that in downturns, we want to maintain mid-single digit operating margins, and with tailwinds, we want to achieve mid double-digit operating margins.

Those are our operating parameters.

We're going to stick by those.

Great.

Thanks for indulging the questions.

Gary Krishnan.

Just a quick question either for Mike and Gary.

(inaudible) gave us confirmation trends in cases by geography but could you also help us understand what you're seeing in terms of trends by vertical thus far.

I'm assuming you're seeing maybe some weakness in financial services, but how about industrial or consumer or healthcare?

Maybe give us a sense of what your expectations are for the quarter.

Again, I would caution about trying to extrapolate trends because visibility is poor.

But I would say that generally what we have seen recently is a drop in financial services and actually, either steadiness or increasing levels in other areas, such as industrial that you mentioned.

Consumer has been good too.

Okay, thank you.

Tobey Sommer.

I had a question for you about Futurestep.

Kind of shifting gears from talking ourselves into a recession, are there any insights or lessons you can learn from the hiring patterns of those RPO customers?

Given that, that's an area where you have some exposure to hiring in greater numbers than on the executive search side?

Skills, skills, skills, education, education, education.

These are generally very technical positions and that's what it comes down to.

Education determines a worker's earnings for life and I would say that the common denominator, even more important than the geography is this technical knowledge worker and that's a common threat.

In terms of the timing and scope of the hiring, is it coming in according to your expectations in timing and in volume?

Or is it exceeding them?

In terms of our placing people or you mean the pace of business coming in to us?

Both, in terms of it's RPO and you've got an order for 100 of a certain category of occupation or employee, or is the customer executing on that according to plan?

Maybe new projects as well?

Yes, yes, yes.

The customer is executing according to plan, and as Mike indicated, we've seen a couple instances where they have increased their order as well.

Again, I would caution that it is difficult to sit here and extrapolate.

But that's what we've seen so far.

I appreciate the response.

Thanks.

Mark Marcon.

I'm sorry, I missed it, you probably give it Gregg, but did you give the constant currency growth rates for the various international --

Yes we did, Mark.

Would you mind repeating them, please?

Sure.

You're talking about year-over-year?

Yes.

Is that what you prefer?

Okay.

In Europe search 5.2%, Asia-Pacific 10%, Latin America basically flat.

For total executive search, it would be plus 7.5%.

And then, for Futurestep it's 31%.

And the total would be 10%.

Great.

And then, again, I apologize if you already gave this, but did you say what the bonus accrual was?

No we hadn't.

But I imagine you'd like to know.

Just out of curiosity.

Approximately $32.5 million for the quarter.

Great.

Super.

And then how should we think about the tax rate?

What happened there?

Well, it's actually some favorable news.

Obviously, in a global business, you're in many different markets and countries so obviously, there are many factors that can affect the tax rate one way or the other.

In this particular quarter, we're pleased to see that the main reason we primarily are benefiting from better profitability in some of our foreign operations that have lower statutory rates.

So that's a good thing and that's our objective, to make more money everywhere around the world and benefit from some of those lower statutory rate countries.

What should we assume for the second quarter and for the year?

In principal, as you know, under accounting rules, our obligation is to look at the year.

So I think you'll continue to see rates pretty much in line with what we saw in the first quarter.

For the full year?

Okay, great.

And then the interest in other, I apologize, again, if I missed that.

What drove the other part?

Again, as you know, that's primarily the non-operating I think you're talking about coming from the ECAP and effectively call it a slight movement down in the financial market, so what you see there is a loss.

But there is largely --

Largely offset in the North American segment?

Yes.

Exactly.

Got it.

On the comp side.

Okay.

Just wanted to make sure that was it and not anything else.

Yes.

Yes.

Wonderful.

Thank you very much.

Tim McHugh.

I apologize again if I missed this, but leadership consulting, did you give how that performed in the quarter and any color around that?

The leadership business, the practice in the quarter was $27 million, so $106 million, $108 million annualized, whatever that turns out to be.

Okay, thank you.

It appears there are no further questions, Mr.

Burnison.

Okay.

Thank you all for joining us.

This is an organization that I am enormously proud of and we're an organization that is forward-leaning.

Our orientation is that volatility creates opportunity and that's what this is Company has been about for 42 years and that's what we're going to continue to do.

So, I want to thank our shareholders and thank you for attending this call.

We'll talk to you next quarter.

Thank you.

Thank you.

Ladies and gentlemen, this conference will be available for replay for 1 week starting today at 7.30 PM Eastern daylight time and running through the date of September 15 at Midnight.

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