Korn Ferry (KFY) 2013 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Korn/Ferry International First Quarter Fiscal Year 2013 Conference Call.

At this time, all participants are listen-only mode.

Later we will conduct a question-and-answer session.

As a reminder, this conference call is recorded for replay purposes.

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 call today, such as those relating to future performance, plans, and goals, constitute forward-looking statements within the meaning of the Privates 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 2012, and in the other period reports filed by the Company with the SEC.

Also some of the comments today may reference non-GAAP financial measures such as constant currency amounts.

Additional information concerning these measures, including reconciliations to the most directly comparable GAAP financial measure is related in the release relating to this call, which is posted on the Company's website at www.kornferry.com.

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

Please go ahead, Mr. Burnison.

Okay, thank you.

Thanks for joining us this afternoon.

I've got Bob Rozek, our CFO; and Gregg Kvochak with us here.

I'm going to -- we've got a few prepared remarks.

I'd like to first talk about the thing that's probably most obvious, which is the environment around us, but also want to talk about opportunities.

I think I've got kind of a unique perspective, because I spent the last almost three months working in Europe, and meeting with clients and CEOs and our colleagues, and clearly the mood goes from probably cautious optimism after the Olympics in the North, to pessimism in the South, but I think that there's definitely some key themes, consistent themes that we're seeing.

Today as we sit here, I would say just like any other organization, Korn/Ferry is feeling the challenges of the global economic environment, and it's everywhere that you look.

We're certainly seeing clients that much like we talked to you about in May as we anticipated back in May, clients have continued to be very cautious when it comes to investment decisions.

Not only CapEx, but also in terms of human capital.

With that context of kind of Google Earth, if you will, I am very proud of our team, the Korn/Ferry team, and the progress that we're making on the implementation of our strategy.

In this last quarter, revenue was slightly better than our expectations.

Revenue came in about $187 million, and a little bit better than when we talked to you last in early June.

Profitability was solid, and the operating margin was a little bit over 9%.

Our balance sheet continues to be very strong.

We finished the quarter with over $300 million of cash and marketable securities, and after this most recent acquisition that we're excited about, that leaves us about $176 million of investable cash with no debt.

I think one of the big stories here that Bob's going to get into is the currency, and the impact on currency clearly on the top line, both sequentially and year over year.

I think the other big story here is that our average fees on the search side continue to hold.

I'm very proud that we are elevating our brand overall as an organization.

Our search fee was $105,000 in the quarter, and that was up -- that's up 40% from five years ago.

I think the other big story here is that our leadership and talent consulting business increased 9%, and our Futurestep business increased 7% -- both of those year on year, on a constant-currency basis.

I think that really shows the progress that we're making on the strategic agenda of the Company.

Now clearly again, when you look around the globe and across industries, the CEOs that I've spoken with have very consistent observations.

Number one, there is an incredible fight for growth and relevancy, while at the same time conserving cash and cutting costs.

When it comes to people, they are looking to innovate then hire.

Not hire, then innovate.

Finally, they're asking employees to do more with less, but they're also increasingly concerned about how you keep people engaged and motivated and relevant.

This last part is exactly Korn/Ferry's opportunity.

In other words, to make our brand synonymous with talent management, a talent solutions advisory Company.

A Company that cannot only help clients assess and assemble great talent, but equally help them engage and develop and retain the talent that they have.

That's our opportunity.

Even though the environment is very challenging and clients are cautious and there's a lot of debate about the left and the right, we have to continue to invest in winter time, to accelerate our strategic initiatives, all while balancing investment and profitability.

I would point to our commitment to make this brand more elastic and evolve ourselves in terms of a talent solutions organization about the acquisition that we recently announced of Global Novations, which is a leading provider of diversity, inclusion, and leadership development offerings.

If you look out over the next five years, Korn/Ferry believes very strongly that learning agility is a very big predictor of executive success.

We also believe that cultural dexterity will be equally important over the next five years; in fact, those forward-leaning organizations, they put a high premium on cultural dexterity and diverse leaders who can motivate and move a work force across borders.

Simply those who understand the complex needs of the environment today, and in fact that the world, because it is gotten flat, and it's becoming smaller, the mindset and solutions actually have to be bigger.

Global Novations, their expertise in this is going to be a very strong asset to our clients.

For us, what does it do?

It gives us more depth and scale in our leadership business, and clearly extends our capabilities.

We're also going to continue to accelerate our go-to-market initiatives; again, all at the same time while we elevate and extend the Korn/Ferry brand.

But it's got -- it absolutely has to begin with being vigilant about accelerating our clients' success.

We're committed to leveraging our R&D and IP as differentiators, to take our products and our intellectual property and make them relevant for the digital age, allowing clients to access that intellectual property easier, embracing the work flow, enabling capabilities of technology, and putting that into new offerings so that we can identify candidates faster and assess them with greater accuracy.

Finally, we're going to continue to pursue our long-term growth strategy by executing a very systematic and pragmatic approach to M&A.

With that, I will stop right now and turn it over to Bob.

Thanks a lot, Gary, and good afternoon everybody, and happy to have you join us on this call.

I'll make some remarks, and then again to a little bit of the details of how the quarter went for us.

Despite the impact of the lingering sluggishness and uncertainty that the worldwide economic environment is having on Korn/Ferry, along with virtually every other global business, as Gary indicated we do remain committed to our strategy of building the industry's leading talent management solutions Company.

We're really pleased with the direction that we're headed in, I would say both organically and inorganically.

In the first quarter of fiscal 2013 we maintained our position as a leader in executive recruitment.

We also continue to invest and grow our leadership and talent consulting and Futurestep businesses.

As Gary mentioned, our consolidated fee revenue in the first quarter was nearly $187 million, and of this revenue amount, L&TC and Futurestep comprise approximately 32% of that total.

That's something that we're pretty pleased with.

With the strengthening of the US dollar, as Gary mentioned, currency did have a pretty pronounced impact on the comparability of our numbers in Q1 of fiscal 2013 to prior periods, both sequentially and year-over-year.

When you look at the impact of currency on the various line items and net it all out, the overall impact was not significant; however when looking at revenues and expenses, it was more pronounced.

Our reported fee revenues of nearly $187 million were down $19.6 million, or 9.5% year over year, and $11.4 million, or 5.8% sequentially.

On a constant-currency basis, our consolidated fee revenue in the first quarter was down $12 million, or 5.8% year over year, and down $8.2 million, or 4.1% sequentially.

You can see the impact that currency did have on our top line.

Executive search experienced softness, both sequentially and year over year.

Our L&TC and Futurestep business on a year-over-year basis both grew, and on a sequential basis we saw growth in Futurestep.

With new business and fee revenue trends, you really continuing to be pretty choppy in the quarter.

We've continued to focus on a disciplined approach to managing our cost base.

In the first quarter of fiscal 2013, despite the sequential drop in fee revenue, our consolidated operating earnings remained relatively flat.

Consolidated first-quarter operating earnings were $17 million with the 9.1% margin.

That compares to adjusted operating earnings in the fourth quarter of fiscal 2012 of $17.3 million, with an 8.7% margin.

Also, despite the almost $20 million decline in revenues when compared to the first quarter of fiscal 2012, fiscal 2013 first-quarter operating earnings were only down $8.9 million, or 34.5%, as a lower cost base partially offset the sharply lower fee revenues.

Our first-quarter ending cash and marketable securities balance was $33 million (sic - see Press Release "$332.9m"), and that was down $85 million sequentially, due primarily to the payment of fiscal 2012 bonuses and long-term incentive payments made in the first quarter of fiscal 2013.

This balance was up $52 million compared to the first quarter of fiscal 2012.

When you look at the $333 million and you exclude from that cash and marketable securities reserved for our deferred compensation arrangements, accrued bonuses at the end of the first quarter, as well as the cash paid for the Global Novations acquisition that Gary spoke about, that's how you translate to our investable cash balance that we have today of about $176 million.

Fiscal 2013 first-quarter earnings per share came in at the high end of our guidance of $0.22, compared to previously reported adjusted earnings per share of $0.28 in the fourth quarter of fiscal 2012, and $0.33 of first quarter fiscal 2012.

Earnings per share were negatively impacted by market-driven net ECAP and COLI expenses in the first quarter of fiscal 2013, compared to the fourth quarter of fiscal 2012, but were essentially unaffected for those same items when comparing ourselves on a year-over-year basis.

Finally, you will note from our press release that we have re-organized our current operating structure, resulting in a re-definition of our reportable business segments, whereby we have separated our leadership and talent consulting services from our executive recruitment segment.

We believe that reporting the leadership and talent consulting separately from executive recruitment aligns us to the current way that we are looking at managing this business, and it will provide investors with more transparency and a better understanding of our results as we drive our talent management strategy.

Futurestep and corporate will continue to be reported as separate segments; however, we will a longer allocate any portion of our infrastructure cost to support Futurestep.

All the segments will be reported without any allocations.

That's the way we look at the business internally.

To facilitate your understanding, obviously we went back and restated the prior-year reported segment information so you can see information on a like-by-like basis when looking at the segments.

I'm going to turn the call over to Greg now to review our newly structured reporting segments in a little more detail.

Thanks, Bob.

We'll start with our executive recruitment segment.

Consolidated executive recruiting fee revenue in the first quarter was $127.4 million, down $9.7 million, or 7.1% sequentially and down $22 million or 14.7% year over year.

Excluding the negative effect of foreign currency exchange rates consolidated executive recruiting fee revenue was down 5.5% sequentially, and 11.2% year over year.

Regionally, at constant currency, North America and Europe fell 5.2% and 5.4%, respectively, on a sequential basis, while Asia-Pacific was off 9.2%, and South America was flat.

Year-over-year on the same basis, North America, Europe, and Asia-Pacific were down 9.2%, 15.3%, and 19.8%, respectively, while South America grew 11.8%.

Worldwide, all of our executive recruitment specialty practices were down, both sequentially and year-over-year in the first quarter.

Sequentially at actual rates, the industrial, financial services, and life sciences health care practices were weakest, and down 11.9%, 6.5%, and 8.4%, respectively.

Year-over-year also at actual rates, the financial services, industrial, and life sciences health care practices were off the most, and down each approximately 19%.

The total number of dedicated executive recruiting consultants worldwide at the end of the first quarter was 415, down 18 year-over-year, and up 15 sequentially, after annual promotions.

Considering the change in our previously disclosed productivity metrics resulting from the current change in reporting segments, annualized fee revenue production per consultant in the first quarter was approximate $1.25 million, compared to approximately $1.37 million in the first and fourth quarters of fiscal 2012.

Despite the drop in fee revenue, consolidated worldwide executive search operating earnings in the first quarter fell only $500,000 sequentially to $22.4 million, from $22.9 million in the fourth quarter of fiscal 2012.

When compared to the first quarter of fiscal 2012, consolidated executive search operating earnings in the first quarter of fiscal 2013 were down $10.6 million, or 32.1%, driven primarily by lower fee revenue, partially offset by lower operating expenses.

The worldwide consolidated executive search operating margin was 17.6% in the first quarter of fiscal 2013, compared to 22.1% and 16.3% in the first and fourth quarters of fiscal 2012, respectively.

Now turning to leadership and talent consulting, or LTC.

In the first quarter of fiscal 2013, worldwide fee revenue for LTC was $28.4 million, up $1.8 million, or 6.6% year-over-year.

On a constant-currency basis, all LTC operating regions grew year-over-year, led by Europe, which was up over 40%.

On a sequential basis at constant currency, LTC was down $2.9 million, or 9.3% from the fourth quarter of fiscal 2012, which was a record quarter that benefited from higher-than-normal levels of large engagements.

Regionally, North America accounted for approximately 65% of the total LTC worldwide revenue in the first quarter.

At the end of the first quarter, there were 48 dedicated LTC consultants who originate service engagements.

Driven by higher revenue and greater professional staff utilization, LTC's fiscal first-quarter operating earnings grew $2.3 million, or 115% year-over-year, to $4.3 million, while operating margin more than doubled to 15%.

In the fourth quarter of fiscal 2012, LTC operating earnings were $5 million, with a 15.7% operating margin.

Finally, turning to Futurestep, which grew for the third consecutive quarter and generated a record $30.8 million of worldwide fee revenue in the first quarter.

At actual rates, Futurestep's fee revenue grew 2.2% year over year, and 5.4% sequentially.

Measured on a constant-currency basis, Futurestep's first-quarter fee revenue was up $2.2 million, or 7.2% year-over-year, and up $2.3 million, or 7.9%, sequentially.

Geographically, all operating regions grew sequentially, led by Asia-Pacific and Europe, which were up 9% and 7.6% respectively on a constant-currency basis.

Futurestep's profitability also strengthened both year-over-year and sequentially in the first quarter.

As Bob previously mentioned, in connection with the change in reporting segments, we are no longer allocating any infrastructure support expenses to Futurestep.

On this basis, Futurestep's operating margin was 10.3% in the first quarter, compared to 9.5% in the first quarter of fiscal 2012, and 7.5% in the fourth quarter of fiscal 2012.

Now I'll turn the call back over to Bob to discuss our outlook for the second quarter of fiscal 2013.

Thanks, Gregg.

Given our normal seasonal pattern, the second quarter of our fiscal year is historically are weakest revenue quarter, due primarily to weaker new business award during the summer months of July and August, when folks are off on vacation.

So far early in the second quarter of fiscal 2013, I would say that our consolidated new business awards have been -- remain choppy, but have trended at a pace essentially in line with our expected seasonality.

In addition, in the current year we also have some world events that we have to contend with, like the Olympics that just ended up, as well as the upcoming US presidential election.

Given the uncertainty and sluggishness of the global economy, as Gary mentioned, we're seeing our clients operate with an abundance of caution, which really makes the current environment pretty challenging.

In light of this, and focusing on the maintenance of appropriate operating margins, we do plan to take certain actions to better align our cost structure with the current realities of our revenue expectations.

As we step back and we look at and try to size up the business and look at a 9% operating margin on the level of revenue that we're currently at a run rate basis, it's not something that we're satisfied with.

We're now in the process of finalizing the plans, and our current estimates would support of our --actions would support annual cost savings in the range of $15 million to $25 million.

The current estimate of the cost to implement these actions are in the range of $10 million to $20 million.

We still have a couple of weeks worth of work left on this to fine-tune it, but that's the current thinking at this point in time.

In summary, assuming that the economic conditions, financial markets, and foreign exchange rates remain steady, our fiscal 2013 second-quarter fee revenue, which will include two months of Global Novations results, will likely range from $180 million to $195 million.

Our diluted earnings per share will likely be in the range of $0.16 to $0.22, and that's on an adjusted basis.

That excludes $0.14 to $0.28 of estimated -- what I'll call cost realignment and non-recurring charges; or on a US GAAP basis, a loss per share of $0.12 to diluted earnings per share of $0.08.

That concludes our prepared remarks.

We would be very glad to answer any questions that you may have at this point in time.

(Operator Instructions)

Tobey Sommer, SunTrust.

Just had a couple of questions about the acquisition you announced yesterday.

Are there any financial details the you could give us, like how much -- what the revenue contribution might be, or anything like that?

I would say that on kind of in this environment, Tobey, we would expect that that Company would contribute $28 million to $34 million in this kind of environment where we are right now.

Our plans going forward are obviously much bigger than that, but that's kind of where it is today.

Thanks.

Since you have an articulated goal of expanding the LTC business and Futurestep, do you have any long-term goals, either as a percentage of revenue, or maybe a revenue goal in dollar terms that you have laid out for yourself over the coming years for those two businesses?

Well, we think that there is in both of those businesses, and I'm certainly not going to put a time horizon to this, because we do only guide out quarterly, and the environment is -- to say it's challenging is an understatement.

But we look at those opportunities with our firm overall to be a talent solutions Company, and we see those as multi-hundred million dollar opportunities for this organization.

I think that the thing that is maybe more relevant than the percent of revenue is the percent of the cash flow of the organization.

We haven't publicly stated those goals, nor -- we've certainly got them, but I think that would be the more meaningful question.

Clearly we need to invest.

We need to grow.

We need to balance all of that with the environment that we're in, but we certainly have an eye towards profitability and cash-flow contribution from those businesses.

My last question and I'll get back in the queue.

Consultant headcount was up, I guess, nicely sequentially, and I was just wondering if the composition of new hires are able to impact results and contribute immediately, or are there a decent number of people who are kind of on guarding leave, and need to have some period of time pass before they start contributing financially?

I think, Tobey -- this is Bob -- if you go back and look at our head count at the end of the year it was up.

As Gregg had mentioned, though, the increase was primarily driven by promotions, so we would have -- those are folks who have been with us for a while who are engaged, so we wouldn't expect there to be much lag in terms of their ability to deliver.

We had -- we started the quarter with 400 -- there was about 24 promotions, and then we had net nine levers, which is actually a very small attrition rate, if you will, around 2%.

Thank you very much.

Tim McHugh, William Blair

Yes.

Just want to process the cost-reduction program that you talked about.

Is this focus mainly on the executive search business, and is it primarily personnel-related, or is it infrastructure, and kind of real estate related as well?

Yes, it's probably -- to some extent it's all those.

As we look at the organization and our goals for building this Company, one of the things under Bob's leadership we need to look at is shared services and infrastructure.

That is the top of his list to look at that.

We think we've got some opportunities around shared services.

Secondly, when it comes to real estate, we, under Bob's leadership, we're also going to look at that, and now some of that you have to be practical.

You can't change that in a span of quarters, but clearly we could take a very strategic review to say this is what it should look like in five years, and what I levers can we pull today.

When you look at it, Bob articulated the reason.

It's going to be a combination of shared services infrastructure, then there's a people component, too.

The only thing I would add to that Gary, as well, is we're also going to be looking at driving some efficiencies in through our procurement activities, as well.

As you look at our cost savings, we're looking at more efficient spending programs across the organization, taking advantage of our scope and scale on a global basis.

Okay.

As we think about the margin here, you're effectively guiding to kind of flattish sequential revenue, and you've had three straight quarters of 9% operating margin, but the guidance -- my quick math implies kind of 7% operating margin.

But yet your comments earlier, I think, said something about 9% not being kind of acceptable to what you would like.

How should we -- I guess I'm trying to -- I know you don't guide out further, but trying to think about what type of margin you're trying to aim for in a tougher environment like this, and then in a better environment down the road?

I would only say that we've typically held it as a goal in this organization that we should have in very good times where there's economic tail winds, this should be a low- to mid-teen operating margin Company.

On the other side, when it is in the dark days of winter, we should strive that we should be at least cash-flow neutral, but hopefully single-digit operating margins.

Those are kind of the two boundaries that we have set for ourselves as an organization.

The issue today, and again as we talked to you in June, sure enough the environment has been pretty consistent with what we thought, we've got a tweenie.

It's neither head winds, tail winds.

We just think if you're doing this level of revenue, our margins should be better.

We're obviously, as Bob said, we're in the middle of trying to look at that.

I think to try to call something out -- what it's going to be in two quarters, three quarters -- is probably a little bit premature.

We're just not -- we haven't finalized our thinking there.

Okay, and then one or two more.

One is on the RPO business -- the press release talks about it is more of a mix that impact the average fee per search, but can you just directly address -- are you seeing any signs of pricing pressure in the RPO business, and then secondarily, were there any share re-purchases during the quarter?

There were no share repurchases in the quarter.

In terms of the Futurestep business, we have not seen any dramatic pricing pressure.

When you look at the sequential growth and success of that business, the good news is that it was in the United States business, which may be a little bit counter-intuitive, but we continue to see opportunities with big clients desperately trying to find knowledge workers.

Those are not -- those companies are border-less.

Okay, thank you.

Jennifer Huang, UBS.

Hi, thank you.

Can you just provide us with an update on your current thoughts around capital allocation?

You still have $175 million in your investable cash after this acquisition.

What are your thoughts on further acquisitions, as well as share re-purchases or dividends?

Well, that's just something we don't really comment on as an organization.

Philosophically, we continue to believe that we have an opportunity to invest in the business, number one.

But at the same time we're mindful, very mindful, of the fact that it's not necessarily sustainable in the long term to have cash earning 10 basis points.

We're very well aware of that.

I think we've got a demonstrated track record of deploying the capital and growing the business, but if you just look at our leadership business today, as an example, we are going to have to invest into that business to grow it.

There's no other way.

It would be naive to think otherwise.

Our first bias is to invest it in the business, and we're cognizant of what acceptable returns need to be.

Okay.

Secondly, can we dig into the margins a little bit?

US was -- North America was obviously very strong.

Asia and Europe were slightly weaker in the first quarter, and I know last quarter you mentioned some incentive comp were up as far as I think this kind of pricing internally.

Were those still the impacts that we see in Europe and Asia this quarter?

Asia's real simple.

Asia is -- Japan and Australia we did not perform at the level that we should.

It's that simple.

We've got a great team in Asia and we've got great teams in Japan and Australia.

I'm assured that this quarter will be much better, so the profitability in Asia this last quarter is directly linked to those two areas, sub-regions, of the world.

The other macro trend that I would put over Asia that you could put over the entire organization is financial services.

That does have an impact on our business.

In terms of Europe, there was increased profitability sequentially.

We saw some very good strength in Germany and Switzerland.

The UK has been impacted by financial services and the Olympics, but I'm -- our European business is second to none.

I've got total confidence in that.

Of course profitability is going to be impacted when you read that $100 billion was just taken out of Spain in the month of July, 7% of the economy, so yes, but I'm pretty comfortable with what we're doing there.

Okay, great.

Last question for me, if I could.

Now you guys disclosed the LTC fee revenue and consultants, can you talk about just from Global Novations, how those consultants, I guess, compare to your current ones?

I know on the website, at least, I think it was something like 16 principles at that firm.

Are they producing around the same level?

We don't disclose the specific attributes of our businesses in that detailed.

I would tell you that we obviously think that there is an incredible strategic fit with the organization, but more importantly, we think that there is a cultural fit.

In doing any kind of investment acquisition, that piece is many times overlooked.

We feel very good about that on a number of different dimensions, including the contributions of people.

We think that will fit very nicely with our current organization, and within our current LTC business.

Okay.

Thanks very much.

Ty Govatos, CL King.

Hi, two technical questions.

Can you let me know what the bonus accrual was in the quarter?

If I'm understanding what you're saying, the second-quarter guidance has about $5 million in revenues from the new acquisition?

That's correct.

The bonus accrual?

Bonus accrual is about -- right around $26 million.

Thanks a lot.

Okay.

Mark Marcon, RW Baird.

Good afternoon.

I'm sorry if I missed this.

I just got on the call a little bit late.

The -- in terms of the pay-back, the expected time period for the pay-back for the restructuring, what should we expect?

It'll be -- it should be less than a year.

If you look at the savings -- again, we banded it by $15 million to $25 million and the cost was $10 million to $20 million, so we would expect it to be less than a year.

Okay.

In terms of Novations, what sort of margin should they be able to run at, as part of your organization, roughly speaking?

Roughly speaking, it should be 10% to 15% margins.

Okay, so basically along the same lines as the rest of the organization.

Would you expect them to grow at a faster rate or same rate as the overall organization?

I think after -- once they get on board and we get fully integrated, Mark, it's going to be really hard to pull it apart, because of the plans we have from an integrated market perspective.

I think it'll be synergistic in any way you look at it, but it'll be hard to say that they will grow faster than the rest of the business, because I think it will be done on a combined basis.

Okay.

Obviously the global challenge with regards to macro, as well as what's going on in financial services is fairly obvious, but wondering if you can give some commentary with regards to just order trends that you ended up seeing, in terms of the confirmed orders that were coming through by month?

Was there any sort of improvement as the quarter went along, or how would you characterize that?

Much like we thought when we talked to you in June.

June was better than May, July was a little bit less than June.

August was about the same as July.

Basically, in line with what our expectations, with what we were thinking in early June, kind of broad brush.

That's what we've seen.

Okay.

One of your competitors, on a recently conference call, made some mention with regards to LinkedIn.

Maybe there's a little bit of an over-reaction to that, but any color that you could provide just in terms of either client behavior or behavior among any of the members of your team as it relates to that?

I don't know what you're really getting at, Mark.

I don't know what you're referring to.

Specifically, they mentioned that a few of their consultants ended up leaving and going to some clients and basically came to the conclusion that they could use their -- the database from LinkedIn to basically substitute for their internal database.

I think for many years people have had those kinds of views.

I think that look, we have to be more relevant to our clients.

We're not getting paid on that part of the business, we're not getting paid for just finding people.

We've got to find out who they are.

We think that it's an incredible opportunity, social media.

That company that you mentioned is one.

I haven't seen anything specifically about what you're talking to there on a granular level.

It seem like it was isolated and it basically sounds like you're confirming that.

I don't know what they said, but I can only say what we're doing.

We think it's -- we're trying to incorporate social media and intellectual property into what we do.

Right.

No impact in terms of pricing?

I don't know how you would -- I don't know how one would make a judgment on that.

Look, CEOs in every business, they're all going from the same play book.

One of those is to make sure that they're asking more with less people for less money.

They're also looking very heavily at stockpiling cash.

They're also looking at cutting capital expenditures.

They're also looking at streamlining their operation, cutting costs, so that's the environment that we're in.

We've got to play with.

Understand, thank you.

Tobey Sommer, SunTrust.

Thank you.

I was just wondering if you could describe Global Novations in a little bit more detail -- its customers, its delivery model, and maybe also comment on cross-selling opportunities, if that's an element of the strategy?

Thanks.

Well, I personally think the word cross-selling is the two most over-used words in business, but clearly we believe that as an organization that we need to broaden the conversation with our clients, and we have to be more relevant.

We have to infuse intellectual property.

We have to really deliver on what a CEO thinks about, and that's not only assessing great people, but it's assembling great teams, and getting them to work together and empowering them, and inspiring and then motivating them.

Part of that, given that CEOs are border-less, revolves around cultural dexterity.

As we look out over the next five years, we think that that's going to be an increased premium is going to be put on that.

This great company Global Novations, with its outstanding people, give us the ability to broaden the conversation with our clients.

It also gives us more depth in that leadership business as we go to market as one firm, one integrated firm.

Its client base are blue-chip clients.

They are very consistent with Korn/Ferry's overall client profile.

Their people, we believe, are outstanding and fit culturally within our great firm.

Their go-to-market strategy is very similar to the Company's.

They have a delivery model that kind of mirrors our LTC business.

Thanks.

There are no further questions, Mr. Burnison.

Okay.

Listen, I thank everybody for their time this afternoon.

Clearly, I believe that this word uncertainty is an over-used word, and it abounds in the Internet and newspapers, on CEO's minds, but for us, we have to continue to not just adopt, but to really adapt and adjust.

We're going to continue to maintain a forward leaning innovations-oriented mindset, and it all begins with our clients, and it begins with our people.

I thank our shareholders for listening to this call, and I also thank the wonderful colleagues at Korn/Ferry.

With that, we'll talk to you next time.

Bye-bye.

Ladies and gentlemen, this conference call will be available for replay for one week starting today at 7 pm Eastern time and running through the day September 12 at midnight.

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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.

That concludes your conference for today.

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You may now disconnect.