Korn Ferry (KFY) 2015 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Korn/Ferry third-quarter FY15 conference call.

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

Following the prepared remarks, we will continue a question-and-answer session.

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

We have also made available on the investor relations section of our website at www.Kornferry.com a copy of the financial presentation that we will be reviewing with you today.

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 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 FY14 and the other periodic 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, EBITDA, and adjusted EBITDA.

Additional information concerning these measures, including reconciliations to the most directly comparable GAAP financial measure, is contained in the financial presentation and release relating to this call.

Both of which are 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.

Thanks, Nick, and good afternoon, everybody.

Thanks for joining us.

We had another solid quarter as an organization.

Revenue was up about 7% at constant currency.

We did have -- like most global Companies -- we had a negative impact from FX, and it was about $9 million negative for the quarter.

So, we came in at $250 million.

If it wouldn't have been without that FX, it would have been $259 million in constant currency.

But a really good quarter; up 7% constant currency, and profitability was also strong.

EPS was about -- it was up about the same thing, about 7%.

We saw steady growth across, really, all lines of business.

Last call, we talked about, I was worried about energy.

We really did not see any kind of decrease in our energy business through the third quarter.

Futurestep just continues to lead the way.

They knocked the cover off the ball.

21% up, constant currency.

Search was up 3.5% with all regions being up.

Leadership business had a good quarter.

That was up 6% constant currency with a really strong EBITDA margin.

The LTC EBITDA margin was a little over 18%.

We closed an acquisition last week of, I think, a really special development Company called Pivot Leadership, and what they do is they provide really high-touch, customized, immersion-type development programs for CEOs around the world.

World-class people, world-class intellectual property, and really, add to our capabilities to transform companies by working with leadership teams to really accelerate their strategy through people.

I think as that acquisition and certainly what we've been doing over the last few years -- as it shows, is that we are committed to creating the preeminent authority on leadership and talent.

And so, going forward, we are going to continue to deploy capital, to invest in IP, as well as top talent and solutions, and we're really going to focus over the next coming quarters on really five areas.

Number one, continuing to relentlessly drive a proactive, go-to-market strategy.

We deal with 5,000 clients a year.

We have an enormous opportunity to broaden the conversation, deepen the relationships.

Two, we have got to create a more global, solutions-oriented organization.

Three, we are going to continue to innovate, and principally through leveraging and commercializing our IP.

We've got this Korn/Ferry Institute.

We're going to continue to make investments in that Institute around talent analytics and learning and enterprise agility.

Number four, we have to develop our people to broaden the conversation and to make this a career, lifetime destination for our colleagues.

And then, finally, we are going to have a balanced approach to M&A and capital.

So, that's kind of an overview.

I think, again, very, very, very solid quarter, given that it covers the Christmas time and holiday time.

And, with that, I will turn it over to Bob.

Bob?

Great.

Thanks, Gary, and good afternoon, everyone.

Despite the seasonal impact of fewer your working days and the effect of the foreign currency that Gary talked about, our reported fee revenue -- we continued to post strong financial results in the third quarter.

We remain focused on the execution of our strategy which includes the disciplined deployment of capital according to the parameters that we talked about on our last call.

As Gary mentioned on March 1 we closed on the Pivot Leadership acquisition which is really an investment that will strengthen our leading market position in L&TC.

Pivot's customer base, their intellectual property, and strong business development team are an excellent complement to our leadership and talent consulting business.

In the third quarter, at actual exchange rates we achieved consolidated fee revenue of $249.5 million, that's up 3% year-over-year and, down 2.4% sequentially.

However, at constant currency, our fee revenue in the third quarter actually grew $16.4 million, or almost 7% year-over-year, and was flat compared to the second quarter.

All three of our major service lines grew year-over-year in the third quarter when measured at constant currency.

Overall, just to give you a sense of our new business trends, they remained positive in the third quarter.

In Executive Search, new orders were flat when compared to the third quarter of FY14, and down about 6% sequentially, but that was primarily due to the year-end holiday seasonality.

As projected, both November and December were seasonally slower with January and February new business rebounding to pre-holiday levels.

And, even in the case of February, a little bit better than that.

And, this is really particularly true for North American Executive Search where we saw very soft November and December in terms of new business, but that was followed by a strong rebound in January and February where our monthly new orders were up over 20% when you compare that to November and December combined.

In L&TC, new business awards, in the third quarter grew modestly year-over-year and were flat compared to the second quarter of FY15.

And, Futurestep, as Gary indicated, had another solid quarter especially with respect to new business, but they're total award up nearly 19% year-over-year.

Earnings and profit margin trends were strong.

We improved in the third quarter with all three of our service lines posting higher EBITDA and EBITDA margins compared both to the third quarter of last year as well as the second quarter of FY15.

Excluding the offsetting net impact of acquisition costs and restructuring charge recoveries, our adjusted EBITDA improved $3.8 million, or almost 11% year-over-year reaching $39 million in the quarter.

When compared to the second quarter of FY15, adjusted EBITDA in the third quarter was down about $4.9 million.

That's primarily the result of your call -- and our last call, we talked about the positive net impact of non-recurring items in the second-quarter results as well as the fact that we had sequentially lower fee revenue.

EBITDA margin was very strong in the quarter at 15.7%, compared to 14.5% last year and 17.2% in the second quarter.

On a GAAP basis, our operating earnings in the third quarter were up $5.6 million, or 20% -- almost 21% with 190-basis-point improvement in margin year-over-year.

And, sequentially, the GAAP operating earnings were down $1.5 million, or 4.4%.

We continue with having strong financial position, and it improved in the third quarter with total cash and marketable securities of $453 million.

That's up $76 million compared to the third quarter of last year and up $53 million compared to the second quarter.

Excluding cash and marketable securities that are reserved for our deferred comp arrangements and our accrued bonuses.

That's a concept we refer to as investable cash.

That balance is approximately $205 million, which is up $44 million year-over-year and up $25 million on a quarter-sequential basis.

Approximately 41%, or $84 million of the investable cash, resides in the US.

And, then, after you consider our working capital needs, our worldwide, net investable cash is now approximately $130 million with about 40%, or roughly $50 million of that residing in the US.

And, as you'll recall, we previously announced a dividend, and we will initiate that dividend of $0.10 per share payable on April 9 to shareholders of record of March 25.

And then, finally, our fully diluted earnings per share were $0.46 in the third quarter.

That was up $0.03, or 7% compared to the third quarter of FY14.

And then, sequentially, the earnings per share were down $0.05, and that's really as the result of lower fee revenues, and then again, the positive effect of those items that we had in the second quarter.

With that, I'm going to turn it over to Gregg who is going to review the operating segments in more detail.

Okay.

Thanks, Bob.

Starting with our executive recruitment segment.

Globally, revenue growth on our Executive Recruitment segment in the third quarter was negatively affected by both year-end holiday seasonality and foreign exchange translation rate.

On a consolidated basis, at actual exchange rate, fee revenue in Executive Recruitment in the third quarter was $143.5 million, down $560,000, or 40 basis points year-over-year and down $5.4 million, or 3.7% sequentially.

However, eliminating the effects on fee revenue growth of the change in foreign currency translation rates, consolidated Executive Recruitment fee revenue was up $5.1 million, or 3.5% compared to the third quarter of FY14, and down only $1.6 million, or 1.1% compared to the second quarter of FY15.

On a regional basis, also at constant currency, North America was up 1.8%.

Europe was up 2.6%.

Asia-Pacific was up 7.9%, and South America was up 14.7% when compared to the third quarter of FY14.

On a quarter-sequential basis, also at constant currency, North America was down approximately 5.2%, due primarily to the seasonally slower November and December previously discussed while Europe was up 6%.

Asia-Pacific was up 2.6%, and South America was essentially flat.

Compared to the third quarter of FY14, at actual exchange rates, growth in our major specialty practices was mixed with the industrial practice up 25%, the life sciences and healthcare practice up 3%.

The financial services practice was flat, while the consumer goods and technology practices were up 6% and 29%, respectively.

Quarter-sequential growth was also mixed with financial services up 6%, life science and healthcare down 1%, industrial down 3%, technology down 5%, and consumer goods down 14%.

Financial services accounted for 19% of all Executive Recruitment fee revenue in the third quarter, which was flat year-over-year, and up 180 basis points on a sequential basis.

The total number of dedicated, executive recruiting consultants worldwide in the third quarter was 444, up 15 year-over-year and up 4 sequentially.

Annualized fee revenue production per consultant in the third quarter was $1.3 million and was also negatively impacted by currency.

The number of new search assignments opened worldwide in the third quarter was 1,318, which was up 6.9% measured year-over-year and up 60 basis points sequentially.

Consolidated Executive Search EBITDA in the third quarter was $35 million with a 24.4% margin compared to $33.5 million with a 23.3% margin in the third quarter of FY14.

When compared to the second quarter of FY15, EBITDA and EBITDA margin in the third quarter were up $2.9 million, or 9.3%, [with] a 320-basis-point improvement in margin.

Turning now to our Leadership & Talent Consulting segment, which generated $64.3 million of global fee revenue in the third quarter.

On a constant currency basis, L&TC's fee revenue in the third quarter grew $3.6 million, or 5.8% year-over-year, with growth in the North America, Europe, and Asia Pacific regions.

Compared to the second quarter of FY15, also on a constant currency basis, L&TC's fee revenue was down $1 million, or 1.6%, due primarily to fewer workdays in the third quarter resulting from the year-end holiday season.

Regionally, North America accounted for 69% of total L&TC worldwide fee revenue in the third quarter.

At the end of the third quarter, there were 140 dedicated L&TC consultants, which was up 15 compared to the third quarter of FY14 and up 9 compared to the second quarter of FY15.

Professional staff utilization in the third quarter was 65%, compared to 61% in the third quarter of FY14, and 71% in the second quarter of FY15.

In the third quarter, L&TC's profitability continued to improve.

EBITDA in the third quarter was up $2.7 million, or 26% year-over-year, to $11.7 million with a 380-basis-point improvement in margin and up $870,000, or 8% sequentially.

This improvement was primarily driven by a greater mix in the quarter of higher-margin product revenue as well as cost efficiencies driven by the use of lower -- a lower proportion of higher cost, contract labor on consulting assignments.

Finally, turning to our fastest-growing segment, Futurestep, which grew for the ninth consecutive quarter and generated $41.7 million of fee revenue in the third quarter.

On a constant currency basis, Futurestep's fee revenue in the third quarter was up $7.8 million, or 21.4% year-over-year, and up $2.7 million, or 6.9% sequentially.

On a regional basis, measured year-over-year at constant currency, North America was up 29%.

Europe was up 25%.

South America was up 41%, and Asia-Pacific was up 4%.

Sequentially, on the same basis, all regions grew in the third quarter led by North America and Europe which were up 8.8% and 6.9%, respectively.

Futurestep's profitability continued to improve with revenue growth.

Futurestep generated $5.9 million of EBITDA with a 14.3% margin in the third quarter, which was up $1.6 million, or 36%, with a 210-basis-point margin improvement measured year-over-year, and up $326,000 or nearly 5% with a 30-basis-point improvement in margin sequentially.

Now, I'll turn the call back over to Bob to discuss our Outlook for the fourth quarter of FY15.

Great.

Thanks, Gregg.

Historically, both the fiscal second and third quarters have been seasonally weaker quarters for us primarily due to the holidays and vacations where both new order releases and delivery of work tends to slow.

And, with both of these quarters behind us, our consultants have more work days in the fourth quarter to drive both new business as well as execute on the confirmed assignments.

Globally, new business returns to pre-holiday levels in January and February.

And, again, February new business was actually incrementally stronger than January's.

March has historically been one of the strongest month for us in terms of new business.

Having said that, on the negative side, the current strong US dollar will impact our FY15 fourth-quarter growth both year-over-year as well as sequentially.

As previously discussed, the foreign currencies weakened throughout the third quarter, which negatively impacted our third quarter year-over-year fee revenue growth by about $9 million, as Gary had indicated.

Our fourth-quarter guidance was prepared using translation rates that were the average for the month of February.

And, that reflects the continued strengthening of the US dollar, and therefore, in the fourth quarter, we are projecting fee revenue growth to be negatively impacted by the amounts experienced in the third quarter in addition to further downward pressure of some $4 million to $5 million.

An additional consideration that we had to bake into our guidance for the fourth quarter was the acquisition of Pivot, which as I said, closed on March 1. We expect that to contribute approximately $2 million of fee revenue in the fourth quarter with roughly breakeven earnings results.

Over on a run rate basis, Pivot is expected to contribute approximately $23 million of annual fee revenue with an adjusted EBITDA margin of 14% to 15%.

And then, finally, assuming worldwide economic conditions, financial markets remain where they currently are, and again, it's considering the effect of the foreign exchange rate that's discussed above.

Fee revenue in the fourth quarter of FY15 is likely to range from $255 million to $265 million, and we expect diluted earnings per share in the range of $0.44 to $0.50.

That concludes our prepared remarks.

We would be glad to answer any questions you may have.

(Operator Instructions)

George Tong, Piper Jaffray.

Good afternoon.

Hi, George.

Could you provide some additional context around why weighted average fee built per engagement stepped down modestly in Executive Search this quarter?

Yes.

I think there's a lot of it was due to the currency -- the impact from the overseas revenues, George, that we experienced in the quarter.

Depending upon any given quarter, you get a little bit of a mix in terms of you're doing more CEO or higher level searches versus other senior management positions.

The only thing I would say is in this quarter, we typically have a handful of relatively large search engagements, and we didn't see those in this particular quarter.

Yes, and also, George, obviously you noted that we were up four consultants on a sequential basis.

So, that there's some ramp up time.

Ramp up time associated with those.

All right.

And then, looking more specifically at North America Executive Search, are you seeing anything that might account for some deceleration in growth on a year-over-year basis?

So, stripping out seasonality and December work days, on a constant currency basis, compared to earlier quarters of the fiscal year?

No.

We haven't seen anything that would suggest that.

You've got -- the Christmas holidays in there, for sure.

But, there's nothing fundamentally -- and last month's employment numbers would certainly confirm that.

Yes, George, it you need to go back and you look at -- that's what we tried to highlight on the script.

November and December were just soft months for us, but a little bit softer than we expected.

But, January and February have popped back up pretty strongly.

Okay.

That's helpful.

And, looking at the LTC segment, do you see additional room for hiring there given where utilization -- [help] utilization rates are at currently to pursue additional growth opportunities in the segment?

Well, we think there's a ton of opportunity for hiring, and so the issue is finding that talent.

Some of that you can hire piecemeal, and other parts of it, you have to go out and look at making investments into organizations where you get intellectual property and people at the same time, and we are looking at both.

An example of that, George, would be the Pivot Leadership acquisition we did during the quarter.

And then, last question for me.

Your continuing to see very strong double-digit growth in Futurestep.

Can you discuss the sustainability of double-digit growth and what factors potentially drive upside or downside to your growth expectations?

Well, look, you've got positive GDP growth, which generally means you've got positive employment numbers.

And, today, you've got a real orientation toward skills-based labor.

And, that certainly has had a positive impact on our business in that segment of the market.

Our expectation would be that that would continue.

We guide out no further than quarterly but certainly looking out in the short-term, there is nothing that would suggest there are structural changes to what we've seen over the last several quarters.

Very helpful.

Thank you.

Tim McHugh, William Blair & Company.

Hi.

Yes.

Thanks.

Just following up on that prior one, can you tell us what year-over-year January and February trends were?

Taking out the seasonality?

Year over year, January and February compared -- you're talking new orders?

Yes.

The new order comment.

Yes.

So, our new orders year over year -- give me a second here.

That would be -- go on to the next question, and I'll get back to you.

Okay.

Can you also -- can you quantify, I guess, talk about the sustainability of the product sales -- that impacted the leadership margin?

How much were they up?

And, is that a sustainable trend that enhances how we should think about margins over the next couple of quarters for that business?

Yes.

I would say, Tim, the products revenues were up about $1.5 million.

And a lot of that is if you happen in a particular quarter sell a number of perpetual licenses, you'll see that type of a pop-up.

I wouldn't peg L&TC at an 18% margin especially over the near term as we continue to -- as Gary just indicated higher into that business.

We're going to probably see a little bit of downward pressure on the margin, if anything.

Okay.

Tim, in pure Executive Search, if you compare January and February of this year versus January and February of last year, you're about flat.

Okay.

And, just to follow up on that then, to the extent -- what do you attribute being flat to, I guess, at this point?

You said basically year over year, you were flat in the new business last quarter.

What is flattening out, I guess, in the Executive Search business?

Tim, that would also be at actual rates, too.

So, obviously there is -- .

Okay.

In constant currency, it's better than that.

Yes.

Absolutely.

Okay.

Is that true of the comment you made about new business for Q4?

I'm sorry.

Q3 as well?

Yes.

That would be true.

Yes.

Flat at actual rates but up on a constant currency basis.

Okay.

And then, I guess, last one.

I didn't see a cash flow statements so, I guess, buyback -- did you execute anything this quarter?

And, I guess what is the thought on that?

Yes.

We have not executed any buyback yet on this quarter.

As we've talked about our deployment of capital, our first priority is to put the capital back into the business, and we closed the Pivot acquisition.

We have another handful of interesting opportunities that we are currently pursuing, and so we'll -- as we always talk about we're going to take a balanced approach to capital and the use of buybacks will come into play when the other M&A and internal uses -- we don't see anything that's real interesting there, Tim.

Okay.

Thanks.

Tobey Sommer, SunTrust.

Hi.

This is Frank in for Tobey.

I wanted to see if I could get a little additional color on what's going on in the financial services vertical in terms of Executive Search?

Any additional color you can give for what you're seeing there would be great.

No.

It's much of the same.

It's very challenged, obviously.

Some of the big global institutions are certainly questioning what parts of the business to keep versus divest.

It's re-regulated.

There has not been much change in that environment.

Still seeing good activity in asset management and insurance.

But, the big -- the investment banking, capital markets -- nothing has really changed there.

Okay.

Great.

Can you remind us a little bit of at the seasonality of LTC moving into the next quarter?

And, how you see that throughout the year?

Does anything change on that side?

No.

I think if you go back and look at LTC, Q1 and Q3 -- our fiscal Q1 and Q3 are their lower-performing quarters and then Q2 and Q4 are their better-performing quarters.

Okay.

Great.

And, in your prepared comments, you said that you were little bit surprised that energy had held up pretty well.

Are you seeing any weakness in January or February?

Or, what's your Outlook for the energy vertical going forward?

I still believe that we are going to have some softness there.

It did not hit the numbers through the third quarter.

But, I would be a little bit surprised if we don't have some impact there.

But, listen, that's -- very difficult to tell given the volatility there.

Okay.

And, last one from me.

Investment in IP going forward, any significant changes there?

We've been -- no.

Same game plan.

We are -- every quarter here we have been investing through the income statement in intellectual property.

And, we're going to continue that primarily around an area of assessment.

We've got a world-class assessment engine that we are unveiling right now that will be a separate business for us, but it will also be part of our search [chastity] and how we assess candidates.

We will continue to invest in talent analytics as well as concepts around culture, learning agility, enterprise agility.

Great.

Thank you very much.

Kevin McVeigh, Macquarie Research.

Great.

Thanks.

Hey, Gary, just to follow up.

On the oil and gas, is there any impact in the Q4 guide from that?

Or, would you think it's past Q4 that you may see some potential softness there?

Well, listen, overall energy is 7% of the firm in total.

And, when you actually look at that, search is probably a little bit less than 50% of that.

These are right off the top of my head numbers.

So, we haven't seen any slippage in the leadership work that we do.

We do a lot of leadership work with big companies -- big oil companies.

We haven't seen anything -- any slippage in that.

So, it's not like it's material to us.

So, it wouldn't be a big number impact.

But, yes, we have assumed that there would be some negative impact in our fourth quarter.

Okay.

And then, Gregg, you made a comment about contract labor helping you on the expense side.

Is that something new?

Or, something that maybe you are using more now?

And, how should we think about that going forward?

And just, is that more on the search side, or is that on the LTC side as well?

Yes.

This is Bob.

That's really on the LTC side.

We use actually the inverse of the way you are thinking about it.

We used less contract labor over the -- within the third quarter.

And, when we use our own folks, we end up having more profitability on each engagement.

Contract labor is a little bit more expensive than our own internal folks.

And then, over the holidays and so on in the mix of the work that we had, we were able to better utilize our own internal folks at work.

If you go back, you look at the utilization in the quarter year over year, it was up about 400 basis points, and that was really -- excuse me, our own folks more significantly on the engagements that we delivered.

Got it.

And then, just from a candidate perspective, is it getting easier to source candidates as there's just more confidence in the economy?

I.e., maybe in the past there had been a hesitancy to move given the macro uncertainty?

Or, how is it sourcing candidates just at a very high level?

Still very difficult.

People -- there is still a reluctance on the part of candidates, and the other macro trend we're seeing is people are working much longer.

And, on the other side of that, it's substantially harder for a younger person to get a job and then you've got this movement towards a more skills-based economy, and I think that's one of the reasons why the Futurestep business is doing so well.

Great.

Thank you.

Mark Marcon, Robert W Baird.

Good afternoon.

With regards to North American Executive Search, a couple of questions there.

First of all, can you just specific to North America, can you talk about how the practices did during this quarter?

And then, a little bit more color with regards to the January, February commentary since that obviously -- it would all be -- or almost all in dollars?

Okay.

Well, listen, February was very solid.

You have the -- you want to give the dollars, Gregg?

Yes.

And, I'll come back to trends but go ahead.

Go ahead and do the market, and then -- .

When you look at the market, very strong in life sciences and health care.

Technology -- the old tech firms not a lot of activity.

Certainly more from the quote, new tech firms.

Consumer goes in and out from quarter to quarter.

So, it's kind of hard to judge that one.

Financial Services showed strength sequentially, but I don't think -- I think it's just the fact of the previous comparable.

Industrial held up pretty good, and like I said earlier, didn't see the falloff in energy that maybe I would have thought last call, Mark.

Okay.

Okay, so Mark, our new order trends year over year.

So, January and February this year compared to January and February of last year were up about 2%.

The pattern is a little bit different.

We peaked in January last year and then dropped a little in February.

This year, February was better than January.

Okay.

So, February was better than January, and January was better than November or December, even when we -- .

Yes.

That's correct.

(multiple speakers)

Holiday weeks.

Okay.

Yes.

You go back to -- Mark, you go back to November/December, we lost quite a bit of time.

It seemed like clients and everybody in December took like two weeks off, and even in November, that seemed like a pretty short month, too.

And so, based on how things are trending within North American Executive Search, it sounds like you would expect to be up more than the 1% growth that you saw this year on a year-over-year basis?

Well, we certainly expect to be -- I -- we expect to be up in the fourth quarter from where we are in the third quarter for sure.

I meant on a year-over-year basis.

So, last year you did the $80.2 million in North America.

Mark, we would expect to be up year over year, Mark, more than the 1%.

Right.

Okay.

So then, we're going to see that rebound flow through.

And then, with regards to EMEA, on a local currency basis, a good performance.

Can you break that down by geography?

Or, what you're seeing?

Contrary to the macroeconomic picture, we've got a fantastic team and a fantastic offering.

I would say that we saw really good results this quarter in France and Switzerland that kind of stuck out.

I wouldn't say that it was -- I wouldn't point to any single factor.

But, those were certainly standouts.

We didn't see any kind of systemic weakness in our European business during the quarter which is very encouraging, giving what you read.

That's great.

And then, just coming back to North America, the margins were very strong, and if we take a look at year to date, it has been really good.

Has there been any -- is it because you've been growing some of your own and bringing them to the floor?

Or, how should we think about the potential for that to be sustained?

Yes.

I think, Mark, the margins in the third quarter were a little bit high -- higher than what I would expect to see going forward.

With the revenue slowing down, we made the adjustments to the variable compensation.

There were also positive adjustments for comp obligations as the market -- the overall market came down through the end of the third quarter.

So, our liability in our deferred comp program comes down, and we get some positive effect from that.

I would say, looking at North American margins, it has been that 25% range -- EBITDA margins in a 25% range, plus or minus.

Got it.

Great.

And then, with regards to Futurestep, continue to see strong growth there.

What sort of projects are you getting now?

How much more tilted is it to RPO versus the smaller onesies-twosies?

Yes.

I would say right now we're probably 60/40; 60% of Futurestep's business is RPO, 40% is single search.

And, quite honestly, Mark, both of them are growing and contributing to the substantial growth that you're seeing in an equal amount so I don't expect that to shift much going forward.

We are still looking at -- [burns] again trying to do -- to continue to do a nice job on layering in longer-term, larger sized contracts, and we're seeing that play out in terms of the -- I'll use this term maybe a little bit inappropriately with the backlog or the work that we're carrying forward.

Great.

And then, lastly, can you give us a little more color with regards to Pivot?

How it enhances the overall offerings, and how it is going to fit in?

Well, we -- in the leadership and the LTC market, which, depending on how you count it, is probably, as we see it, $10 billion to $20 billion market opportunity.

We are very long in assessment.

We've got many different kinds of instruments there.

But, where there's real opportunity for us is on the development side.

And so Pivot helps us to add depth and scale and quality and great people on the development side of our leadership business.

The only thing I would add, too -- for me, it's kind of a double win because, as we've talked about having challenges, finding the right individuals who have deep subject matter expertise as well as a real commercial side to them.

And, when you look at the [theaters] that come with Pivot, we've got a group of really good consultants coming into the organization that possess both sides of the equation.

Great.

Thank you.

It appears there are no further questions, Mr. Burnison.

Okay.

Well, listen, thanks, everybody.

I've got to tell you -- really good quarter.

I'm proud of our organization.

We've got an enormous opportunity to create the brand that's synonymous with all things talent.

And, thank you for your time today, and we look forward to talking to you next time.

See you later.

Ladies and gentlemen, this conference will be available for replay for one week starting today at 7:30 PM Eastern daylight Time running through March 16 ending at midnight.

You may access the AT&T executive playback service by dialing 800-475-6701 and entering the access code of 355454.

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.

With that, you may disconnect.