Korn Ferry (KFY) 2017 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Korn Ferry Fourth Quarter Fiscal Year 2017 Conference Call.

(Operator Instructions) As a reminder, this conference call is being recorded for replay purposes.

We have also made available in the Investor Relations section of our website at 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 and Litigation Reform Act of 1995.

Although the company believes that expectations reflected in such forward-looking statements are based on reasonable assumptions, investors are cautioned to not 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 in the periodic reports filed by the company with the SEC, including the company's soon-to-be filed annual report for fiscal 2017.

Also, some of the comments today may reference non-GAAP financial measures such as adjusted fee revenue, constant currency amount, 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 earnings release relating to this call, both of which are posted in the Investor Relations section of the company's website at www.kornferry.com.

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

Please go ahead, sir.

Okay, thank you, Kathy.

Good afternoon, everybody.

With me is Gregg Kvochak and Bob Rozek.

I'm going to first make some comments on the year-end quarter then turn it over to Bob.

This was a very, very good year for us.

We achieved almost $1.6 billion in revenue, which is the highest in our firm's history.

It was up 23% at constant currency this past quarter.

All the businesses were up sequentially in our fourth quarter, which ended in April.

Futurestep was up 10% sequentially.

Hay Group was up 5% sequentially.

Search was up 6%, and I'd point out that North American search really had a good quarter.

It was up 15% sequentially.

And essentially, all industries were up on a sequential basis.

Fee revenue is about $406 million.

Almost half of our business comes from Hay Group today.

Profitability was strong.

EPS was $0.62.

We generated adjusted EBITDA of about $60 million for the quarter or $240 million annualized on revenue, like I said, almost $1.6 billion.

Futurestep continues to top each previous quarter.

They were up year-over-year at 15%.

As I talked about Hay Group was up sequentially, although year-over-year, it was essentially flat at constant currency.

The profitability was very strong, actually, at an 18% profitability margin, but we're not seeing the growth that we'd like to see in that business.

We're continuing to make changes to unlock the potential there.

You probably saw with this last quarter, we made 3 leadership changes.

Number one, we brought Mark Arian to lead the business.

Mark has a 25-year history in professional services with top-notch services firms, such as E&Y and AON and Hewitt and Towers Perrin -- or I should say Towers Watson.

Secondly, we asked Byrne Mulrooney to take on additional responsibility of leading our Hay Group's products business, which I'll talk about in a second.

And third, we took Mike Distefano, who's been a valuable member of our executive team, and we have relocated him to Shanghai to lead our operations in Asia and to pay particular attention and have direct oversight over the next few months for our Hay Group business in Asia.

And so when I think further about the Hay Group business, we first think around 2 dimensions.

Part of the business is an advisory business, that's about 70% of the revenue.

The remainder is a products business.

So today, we roughly have about $500 million advisory business and a $230 million product business.

If I think about advisory, we really think the growth is going to come down to 5 factors.

Number one, we've got to drive and integrate it.

And when I mean integrate it, I mean enterprise-wide go-to-market strategy, which has to include robust pipeline management.

Second, we've got to move that business towards bigger ticket, more impactful assignments.

Three, we've got to continue to develop talent in the business as well as adding new talent to consult more broadly.

You've probably seen, we've made quite an investment in people.

In the fourth quarter alone, we've hired 27 consultants into that worldwide, into our Hay Group business.

Fourth, we've got to continue to instill a commercial orientation.

And five, as I've talked about on the last call, we've got to migrate the firm to industries and solutions.

So when you look at our organization on a solution basis, we tend to think of 6 broad solutions: one of those would be talent acquisition, the other 5 are essentially resident within the Hay Group business.

Although that's not entirely true, there's parts of Futurestep that continue to fit in here.

But roughly speaking, if you look at that Hay Group business from a solutions perspective, we're pretty well weighted with the exception of one solution area.

The biggest piece of our business there is assessment and succession, that's about 30% of our Hay Group offering.

When I look at 3 other solution areas: number one, talent strategy and work design; two, leadership development; three, rewards.

Each of those are about 20% or so of the business.

And in the portion that's under-weighted is strategy execution and org design, that's a little bit less than 10% of the overall business.

So if you just kind of think about those solution areas, the ones that are the bigger markets that are very attractive for our brand, leadership development and rewards come ringing off the page.

Obviously, assessment and succession, we've got deep, deep capabilities.

And we continue to build and look to build strength in that area.

But the two that would be the most -- the most tangible and the most practical right now around rewards and leadership development, which we're obviously working very hard on to drive deeper solutions in those areas.

If you think about the products business, that has a much different makeup than the advisory business.

The advisory business is built on our IP.

It's built on our knowledge, but it's delivered through world-class consultants.

The products business has a much, much greater opportunity to scale.

And not only to scale, but to touch a lot of people's lives.

So that business, it's not just people, although it starts with people, but it also entails IP, process and technology.

And so what we're focused on in the short-term are some really short-term wins in that business, primarily anchored around our compensation databases.

We have compensation information on about 24 million people around the world, 20,000 companies.

We licensed that out.

We're looking right now over the past several months in the next few weeks, to continue to add packages to the underlying solution that we offer to drive greater impact, to drive greater value with clients.

And so there's some things we're doing short term on the product side, and then there are some things that we're doing that are going to take -- they're more in the medium-term horizon.

And that really revolves around creating a strategic software-as-a-service platform for talent management, that kind of links together the IP and enables companies to better manage their talent.

So that's kind of how I think about the Hay Group business.

Very encouraged by the sequential improvement in the business, but there's a lot more that's going on under the surface of the car than meets the eye.

So that was really the quarter.

Very good, very -- I'm very proud of this organization.

I think we've got a strong, strong appetite to grow and to change.

And with that, I guess, Bob, I'll turn it over to you.

Great.

Thanks, Gary, and good afternoon, everyone.

I'm going to start out with a few key highlights.

First, Gary indicated our fee revenue in the fourth quarter was seasonally strong with a sequential growth in all 3 of our major service lines.

Revenue came in at $406.1 million.

For Executive Search, fee revenue growth in the fourth quarter was the strongest in North America and in EMEA, which grew at 3% and 10%, respectively.

That's year-over-year in constant currency.

But we also continued to see strong growth in Futurestep, where our revenue for the fourth quarter improved to approximately $59 million, which is up nearly 14% year-over-year at constant currency.

And then again, as Gary indicated, for the full year, our adjusted fee revenue grew to approximately $1.57 billion, which is up over 20% year-over-year.

And the primary drivers of that were legacy Hay Group and the organic growth that we saw at Futurestep.

Second, our earnings growth trends continue to improve.

In the fourth quarter, our adjusted EBITDA was $60.1 million.

That's improvement of $5.3 million, or nearly 10% compared to the fourth quarter.

And for the full year, our adjusted EBITDA was $235 million, and that generates a 15% margin.

Operationally, since the beginning of the calendar year, we've increased the pace of our investment spending, focused on driving growth in each of our business segments.

This includes spending targeted at the reshaping of our workforce through the hiring and on-boarding of a new consulting talent.

In the fourth quarter alone, between Executive Search and Hay Group, we've added 45 new fee earners, many of whom you've seen public announcements on.

All of these new hires are experienced, they're seasoned consultants who will complement and enhance the productivity of our existing team.

After a period of ramp up, we expect the new fee earners to be fully productive within the year and to make positive contributions to growth by the second half of fiscal '18.

And I would also note that we've been proactive in managing our workforce as we manage out our lower-performing consultants.

And then finally, in the fourth quarter, we continue to execute a balanced approach to allocating our capital.

This includes a payment of our quarterly dividend of approximately $6 million, as well as the ongoing repurchase of our shares.

Over the last 3 quarters, we have repurchased approximately 1.1 million shares, and that's at an average price of about $25.27.

This, approximates about 2% of our outstanding fully diluted share base, and we currently have about $125 million remaining on our share repurchase authorization.

Now turning to our new business trends.

First, for Executive Search, globally, our monthly new business for Executive Search have improved since beginning of the calendar year.

In the fourth quarter, our consolidated Executive Search new business was seasonally strong and reached nearly $169 million.

And this trend was especially strong in North America, where our new orders in the fourth quarter were up about 17%, sequentially.

Similar to Executive Search, new business in the fourth quarter for Hay Group was seasonally strong, and that was up about 14% sequentially.

And then finally, current pipeline of new business for Futurestep remains solid.

They have $38 million of awards that were secured.

In the fourth quarter, there was one large new RPO win that just missed the cutoff of April 30, and it was awarded to us right at the beginning of May.

At the end of the fourth quarter, our cash and marketable securities position was $531 million.

That's up about $116 million compared to Q4 of last year.

Excluding amounts reserved for deferred comp and for accrued bonuses, our investable cash balance is approximately $245 million.

That's up about $156 million year-over-year.

And we had outstanding debt at the end of the year of about $256 million, and it's roughly equivalent to our investable cash balance.

Finally, our adjusted fully diluted earnings per share for the quarter were $0.62, and that's up $0.04 or 7% compared to Q4 of last year.

And on a GAAP basis, earnings per share were $0.47 for the quarter.

And then for all of fiscal '17, we generated adjusted EPS of about $2.24, and that's up about 8% year-over-year.

Let me turn it over to Gregg, who will review our operating segments in more detail.

Okay, thanks, Bob.

Our Executive Search segment finished fiscal '17 strong, achieving a record $162.3 million of global fee revenue in the fourth quarter, which was up $2.6 million or 1.6%, measured year-over-year at actual rates and up approximately 3% measured at constant currency.

Regionally, growth in the fourth quarter was driven primarily by North America and Europe.

North America achieved record fee revenue of $97.3 million, which was up nearly 3% year-over-year and 15% sequentially.

In Europe, fee revenue growth year-over-year was 3% at actual exchange rates, and over 10% at constant currency.

By specialty practice, Executive Search fee revenue growth was mixed in the fourth quarter.

Compared to the fourth quarter a year ago, growth in our industrial practice, up 15%; technology practice, up 12%; and our consumers goods practice, up 4%, was offset by slower demand in our financial services and life sciences and health care practices, which were down 5% and 17%, respectively.

For all of fiscal '17, the Executive Search segment generated approximately $680 million (sic) [$618 million] of global fee revenue at actual exchange rates, which translates that last year's exchange rate was approximately $630 million.

The total number of dedicated executive recruitment consultants worldwide at the end of the fourth quarter was 517, up 29 year-over-year and up 10, sequentially.

Annualized fee revenue production per consultant in the fourth quarter was $1.27 million, and the number of new search assignments opened worldwide in the fourth quarter was 1,525, which was up approximately 4% year-over-year.

Consolidated Executive Search adjusted EBITDA in the fourth quarter was $34.2 million, which was up $2.5 million or 7.7% compared to the fourth quarter of the fiscal '16.

This improvement was primarily driven by the stronger fee revenue in the firm's largest Executive Search segments, North America and Europe.

The consolidated Executive Search adjusted EBITDA margin in the fourth quarter of fiscal '17 was 21.1% compared to 19.9% in the fourth quarter of fiscal '16.

Now turning to the Hay Group, which in the fourth quarter of fiscal '17 completed its first full year of integrated operation.

Hay Group achieved seasonally strong fee revenue of $185.1 million in the fourth quarter or $188.2 million translated at constant currency.

Measured year-over-year, flat fee revenue in Europe was offset by slightly weaker fee revenue in all other region.

As previously mentioned, new business activity for the Hay Group in the fourth quarter was essentially flat, measured year-over-year.

The profitability of the Hay Group remains strong in the fourth quarter, adjusted EBITDA for the Hay Group in the fourth quarter was $33 million with an adjusted EBITDA margin of 17.8%, and year-over-year improvement of $2.3 million with a 190 basis point improvement in margin.

For all of fiscal '17, the Hay Group generated $728 million of adjusted fee revenue, or $128 million of adjusted EBITDA with an adjusted EBITDA margin of 17.6%.

Finally, turning to Futurestep, which completed its fourth straight year of double-digit revenue growth.

In the fourth quarter, Futurestep generated $58.7 million of fee revenue, which measured at constant currency, was up 13.8% year-over-year.

Balancing investments to support future delivery capacity relate to the recent sharp increase in new business, Futurestep was also able to achieve improved earnings in the fourth quarter.

Futurestep's EBITDA in the fourth quarter was $8.8 million with a 15% margin.

For all of fiscal '17, Futurestep generated approximately $224 million of fee revenue, just up 15% year-over-year at constant currency and $32.8 million of EBITDA.

Now I'll turn the call back over to Bob to discuss our outlook for the first quarter of fiscal '18.

Great.

Thanks, Gregg.

As previously discussed, our new business activity in the fourth quarter was strong.

Globally, new business in Executive Search has followed the usual historical monthly pattern, where peaks at annual highs in March.

Settles slightly lower in April before it picks up again in May.

Following our historical pattern, we expect Executive Search new business activity to be strong in both June and July.

And what we've seen so far in the month of June really supports that.

For the Hay Group, the fiscal fourth quarter was a good quarter for new business.

And May new business improved on a year-over-year basis.

In general, the fiscal first quarter is a seasonally slower quarter for revenue for the Hay Group, in part due to the beginning of the summer vacation season in the quarter.

With regard to Futurestep, new business activity is expected to remain strong as we continue to see a strong pipeline of new opportunities through the first quarter.

As discussed earlier, to drive our top line growth, we made a conscious effort to accelerate the pace of fee earner and select support staff hiring since the beginning of the calendar year.

In fourth quarter, we added 18 new consultants in Executive Search and 27 new consultants at the Hay Group.

As usually the case, due to time required for ramp-up, many of the new hire consultants will not immediately bill at their full capacity and therefore, these new hires will create some downward pressure on earnings and margins in the first quarter of fiscal '18.

Considering all of this together and assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady.

We expect our consolidated fee revenue in the first quarter to range from $382 million to $400 million, with a $391 million midpoint, and our consolidated adjusted diluted earnings per share to range from $0.48 to $0.56, with a $0.52 midpoint.

And then finally, as we previously disclosed, our post-acquisition integration activity related to the Hay Group is now complete, except for the co-location of a couple of international office, one of which is scheduled to be completed during the first quarter.

We expect the other one to be completed in the second quarter.

The office that we're co-locating in the first quarter will have a charge of about $800,000 to $1.3 million.

And consistent with prior quarters, included in the integration acquisition cost are approximately $2.6 million of the ongoing Hay Group acquisition-related retention bonuses.

And if you recall, those will conclude in December of 2018.

So including these costs, we estimate the fiscal '18 first quarter totally diluted earnings per share measured by U.S. GAAP, will be in the range of $0.43 to $0.51.

So with that, I'll conclude our prepared remarks, and we'll be glad to take any questions that you have.

(Operator Instructions) And our first question will come from Tobey Sommer with SunTrust.

My first question has to do with capital deployment.

We heard about the net cash breakeven right now and fix -- the business is probably slated to throw off a historical normal amount of cash flow, somewhere like 70% EBITDA.

Gary, how do you think about capital deployment, given that you bought Hay 1.5 years ago or so and you're trying to rev up the growth there?

Well, I think on a longer-term basis, it's -- if I think about the kind of the last decade, our market cap has tripled probably, but our share price has not tripled.

The reality is that we have not bought back enough stock to offset the overhang from restricted stock and performance and all that.

So I think that -- one thing is I think about capital deployment is we must at least take care of the overhang that comes about from issuing equity to employees.

I think that's something we have to do.

I think we have to be systematic about it.

And so we're going to continue to do that.

You obviously know we have a dividend so -- I probably change my orientation a little bit, just when you add up the dilution that's happened over the past several years, I think we need to do something.

We have to make a commitment as a board to shareholders to do something about that.

But we're still continuing to look at potential investments/acquisitions.

So I kind of would hope that it's balanced.

Maybe there's a little bit more of a SKU towards a systematic buyback as we've been executing it.

Okay.

You kind of called out reward and leadership development within Hay, slices to the revenue pie chart that you like to emphasize.

Do the higher year-to-date within Hay, do they reflect that emphasis?

And are they kind of directed more towards those 2 areas than the other 3?

Half of them probably do, particularly as it relates to the rewards area.

That's absolutely the most tangible -- we have a substantial amount of IP and data.

So I would say that half of the consultants clearly relate to rewards and leadership development, with actually more of an emphasis on reward.

And the rewards area is the most immediate opportunity for the product piece of that business as well.

In terms of the other hires that were made, those are more broad-based consultants around strategy, execution or design, work design and talent strategy.

And then some of those obviously has a pretty deep industry expertise as well.

Futurestep, revive growth, up to the double digits and you've made some investments as well and you kept the margins healthy.

What's your -- do you have any updated thoughts on what long-term margin prospects are for Futurestep?

I think, Tobey, I think they would continue to be consistent with what we've been talking about in the 14% to 16% range.

Right now we're in the middle of that, but there's room for margin expansion towards a higher end of that range.

Okay.

And I don't know if you have this handy, but when you mentioned new business, you gave some of the changes on a sequential basis, do you happen to have those on a year-over-year basis?

Sure.

Tobey, what would you like to know?

Just the 3 segments, new business on a year-over-year.

Yes.

So for Executive Search, fourth quarter new business was up 2.3% year-over-year.

And the number of units that go with that were about flat on a year-over-year basis.

And then for Hay Group, they were essentially flat on a year-over-year on new business.

And...

For what period of time?

That's for fourth quarter.

Last year versus fourth quarter last year.

And then, give me a second here.

We were down year-over-year at Futurestep but as Bob mentioned, we had a number of large orders that slipped past the April 30th cutoff and into May.

So...

Yes, Tobey, there was one large one that's about $18 million.

We thought could get it in April, but we just -- it just didn't get signed until early May.

Right.

So we did $38 million of new orders in our fourth quarter this year and we have done $58 million in prior year's fourth quarter.

So essentially, if we -- that hadn't slipped, it would be flat.

Our next question is from Kevin McVeigh with Deutsche Bank.

Could you give us a sense just directionally, really nice outcome?

Has there been any change in CEO confidence, post the election?

Trying to get a sense of there's initial optimism that some uncertainty, has that impacted kind of the CEO hiring decisions?

I mean, I would say based on kind of your hiring activity, probably not, but just any thoughts on kind of the current operating environment?

No, not yet.

But if this continues to go like this, where no major legislation is passed, it will impact confidence, there's no question about that.

Got it.

And then Gary or Bob, any sense of, obviously, a lot of revenue enhancement in terms of investment vis-à-vis people.

How much that sapped the Q1 margin and EPS?

I guess, another way, obviously, really good guidance, but is there any way to quantify how much stronger it would have been if not for those investments, given the lack of kind of the one you bring them in versus...

Yes.

For the first quarter guidance?

Yes.

Yes, it definitely has an impact.

It's probably on the total firm, it's probably 100 bps, I would guess.

Yes, it's significant, we're trying to balance flying the plane and investing to go to the moon, too.

Yes, for sure.

And then Gary, I haven't heard you spent this much time on Hay, probably a very long time.

I mean, just strategically, does that stay as-advertised?

Do you look to more to bringing Byrne over, given the success you've had at Futurestep?

How do we think about that business longer term?

I think we have to think that the product business is the most tangible path to grow in this investment horizon for shareholders.

I think that you can sink your teeth around that.

It has exceptional profitability and it's easier to scale.

I think more medium term, the advisory business is compelling.

It's obviously dependent on people.

But the key there is, we've just got to move the average engagement size there.

If you really want to see a lift in that business, we have to be successful around our marquee account, the program and our big clients and the like.

You really have to believe that you can move the business towards more impactful assignments to actually change the growth profile of the advisory business.

Our next question comes from Tim McHugh with William Blair.

First on, I guess, leadership consulting.

I understand it will be helpful kind of discussing then on what you're going to change from here.

I guess, just for context, what's been harder since you bought it?

Because, I guess, that would -- kind of thought we would have seen some improvement in organic growth at this point and maybe would have thought you wouldn't as well, so curious what you found has been more challenging to change there since -- maybe a year ago or 1.5 years ago when you bought it?

Well, I think you're right on the headline observation.

I certainly would have thought that as well.

The good news is the business is essentially the business that we put together pro forma.

But going back, 1.5 years ago, 18 months ago, of course, that's also the bad news.

I think that the thing that's hardest to change there is the significance, the number of engagement, the number of client engagements that are smallish in nature.

That -- to really be able to move that business towards more impactful assignments, all of the folks that we have are fabulous, but they're very, very busy.

And if you look at a world-class consulting organization, you would not find kind of normal ticket sizes that are 6 figures.

You would find them to be 7 figures.

So if you have a consulting business that is kind of in 6-figure assignments, and just to create scale, utilization, all of that, the reality is, it's hard to get those talented people that are busy executing to deliver on those, what I would say, sub-optimally sized engagements to get their mine-share and their time to actually farm and mine for bigger engagements is practically, it's very hard to pull off.

So that's one reason why we're not only kind of developing the folks that we have.

Today, 55% of our workforce is millennials.

But as importantly, we've got to give our organization a booster shot by bringing in talent.

So I think that paradigm of how busy that organization is to execute it on what I would call suboptimal-sized engagements compared to many, many consulting organizations has been the toughest.

And the other thing -- this is Bob.

The only thing I would add to that and is no excuses is the fact that we've put the organization through a significant amount of change last year, and co-locate 85 offices, and we moved everybody on to a common platform from a technology perspective, a process perspective, and they were major, major changes for folks in the legacy Hay Group.

So I think that, to some extent with that being behind us now, gives us the opportunity and the ability to focus on exactly what Gary was talking about without the door to the sideshows, if you will.

And just to follow up, when you talk about going after bigger engagements, is it shopping for or trying to fill up the broader engagement in terms of the scope of the work?

Is it bigger companies?

Yes, broader engagement, not so narrowly defined and focused, but selling one a day, delivering one-a-day vitamins versus just taking a Vitamin C and D and E. It's to be a little bit broader and linking together our capabilities to make them more solutions oriented, so that they're broader in nature.

Okay.

And then just a number one -- numbers one.

The tax rate, you've been kind of all over the map this past year, in favorable way to the downside, but what should we think about the first quarter and then the other perspective on an annual number at this point?

Yes, it's probably, penciling Tim, somewhere around 30%, kind of plus or minus.

But right around 30% is probably not a bad rate to focus on.

And then if you recall, in our prior conversations, that number has come down and, a lot of it is a result of the Hay Group acquisition and so much of our earnings being outside the U.S., which is obviously taxed at lower rates.

Our next question is from Mark Marcon with R.W. Baird.

I was wondering, it sounds like you're pretty well done with a lot of the steps that you were taking in terms of the integration.

To what extent have we fully reflected all of the savings?

Or how much more is there to come in terms of just the savings from the discrete steps that you were going to take on Hay?

Yes.

I think the savings, Mark, are essentially baked into the numbers that we're reporting.

Now there's not -- we had a little bit of a restructuring activity in the fourth quarter, but it's kind of rounding, when you think about the impact it's going to have on the business.

I mean, for us to really, where it's all at right now is at the top line synergies, getting the revenue growing, as Gary indicated.

And then at the current revenue run rate, how would you think about the margins?

And then if you could elaborate in terms of what you would optimally hope for in terms of the revenue growth rate in Hay.

And then if we get that level of growth, where would the margins potentially get to?

Okay.

There's a lot in that question.

Well, I'll start with the growth rate.

I mean, I think, first, that the -- I've always said, although, we haven't been able to deliver for sure, is that I'm looking for a 10% organic growth rate in that business.

Now when you look at that, I would hope that the product piece of it would be, say, substantially higher than 10.

And the advisory business, maybe a little bit less than 10.

But that's in terms of -- that's how I would look at the top line of that business.

And I would say, from a margin perspective, I think as we have communicated in the past, we've got the ranges by each of the lines of business.

And I would see this thing very consistent with that and as we are able to drive greater top line growth, obviously, we'll get leverage and we'll see if she excel towards the higher points in those ranges.

So I mean, as it relates specifically to Hay, thinking that it could be in that 15-ish percent range?

No, longer term, I think it's higher than that, Mark.

I think it's probably close to somewhere in the 17%, 18%, maybe a little bit north of 18% range on the Hay Group.

Well, it's border with 18.

Right.

But you mentioned that you're making some additional (inaudible).

I'm just trying...

We'll see some degradation.

So for the first quarter, it's going to be less but...

Yes, we'll see some degradation in the first quarter as Gary indicated it.

For the company-wide, it's about 100 basis points.

But as we exit the year and start to see the new hires become productive when we expect to be back towards the -- where we are in the fourth quarter in the Hay Group.

Okay.

And can you just elaborate with regards to the product and you -- Gary, in the February/March, you talked about doing more on the staff side.

Can you -- would you make an acquisition in order to do that?

Or would it be continue some of the IP development that you've already done in terms of...

Well, I think to be -- it would have to be accelerated through an acquisition, for sure.

I think that's the most practical.

But having said that, there are many different possibilities that we can do.

One is to -- we license out our IP on the culture side, on the engagement side.

And so we're looking at how can we link -- there's obviously a pretty high correlation between compensation and engagement.

We're looking at how we can link those together to be more of a platform.

And you can also tie that in with managing talent more broadly.

Great.

And then a detailed question from the last quarter.

Just upticks, how much of a benefit was that?

The upticks were probably in the general range.

There wasn't anything unusual in the quarter.

We almost get flat, Mark, on a year-over-year basis.

So nothing unusual on that.

Yes, nothing unusual.

And our next question will come from Marc Riddick with Sidoti.

So I wanted to touch a little bit on -- there was a question earlier about the CEO confidence, post-election.

I wanted to sort of maybe take a similar step to that around the thoughts in the EMEA region in light of having some of the elections behind us.

I know it's more recent, but I want to get a sense of you're seeing any changes or thoughts in that area.

You know I met with many, many business leaders in Europe last week, actually.

I think there's a great hope in France, but I think we all know it's hard to take things away from people once they've been given it.

And in the U.K., specifically, I think there's uncertainty in terms of where this is going to shake out.

So I would say, so we're kind of hopeful in France, steady as she go in Germany and the uncertainty in the U.K.

Okay.

And then one other thing I wanted to touch on, I think you mentioned it and correct me if I misheard this, but I think you had mentioned in the earlier part of your prepared remarks that you were somewhere around 24 million data on 24 million professionals at this point, if that's correct.

And I want to get a sense of what type of efforts are being made?

Or what type of upside might be there as far as sort of maybe expanding the pool of the data that's available that would then be translated into these -- the software's offerings?

Yes, now, that's a great question.

One of the compelling propositions for us is that every 3 minutes, we put somebody in the big job.

So every day, we're getting compensation data points that are real time.

And whether those are hundreds of data points or whether those are thousands of data points, that is something that a stale once-a-year survey cannot do, and that's what we have to capture.

Now that's not a next-week endeavor by any stretch of the imagination, but that's the opportunity, for sure.

So is it fair to characterize it as saying maybe that as you're adding, maybe just the 24 million versus I guess, 20 million, it was, when the deal was initiated, might not necessarily reflect the breadth of the data that you're actually getting on the additional x million folks and ideally, you're looking for a broader reach of what that data can be offered.

Is that a fair way to put it?

No, I think that's exactly right.

We're going to try -- we can have a spot market.

Every day, we see what the spot rates are.

So that should be totally factored in to the database that we license, and people should have a view of what that market is.

I think, secondly, there are opportunities to link that data with engagement, as I answered Mark Marcon's question.

Third, we've got an opportunity to make the data, ironically, more U.S. centric.

And today, it's not so much.

And it appears there are no further questions, Mr. Burnison.

Please go ahead with any closing remarks.

Okay.

Well, look, Summer Solstice 2017, I think that this is a firm that's certainly not the same firm that it was 10 years ago or even a year ago.

But I'm telling you, we're not the firm that we know we can be either.

So this journey is all about -- it's all about a desire to win and it's all about the desire to change and to be agile, and that starts with people.

So it's the same proposition that we offer to clients.

We, too, need to take our own medicine.

So listen, thank you very much for your time and we look forward to speaking next go-round.

Kathy, thank you.

Thank you.

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