Korn/Ferry Q4 Earnings Call Transcript

123jump.com Staff
17 Jun, 2009
New York City

The talent management firm fourth quarter fee revenue fell 43.5% to $107 million and operating loss was $33.9 million compared to income of $20.2 million a year ago. Loss per share was 45 cents as against earnings per share of 36 cents a year ago.

Korn/Ferry International ((KFY))
Q4 2009 Earnings Call Transcript
June 9, 2009; 2:00 p.m. ET

Executives

Gary Burnison - Chief Executive Officer
Michael DiGregorio - Chief Financial Officer
Mark Neal – Principal Accounting Officer
Gregg Kvochak - Senior Vice President

Analysts

Andrew Fones - UBS
Kevin Mcveigh - Credit Suisse
Tobey Sommer – Sun Trust Robinson Humphrey
Jeff Mueler for Mark Marcon - Robert W. Baird

Presentation

Operator

Ladies and gentleman thank you for standing by. Welcome to the Korn/Ferry International conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. As a reminder, this conference is being recorded. Before I turn the call over to your host, Mr. Gary D. Burnison, let me first read the cautionary statement to investors. Certain statements made in the presentation today will 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 in the company’s annual report for fiscal 2008 and in the other periodic reports filed by the company with the SEC. With that, I’ll turn the conference over to Mr. Burnison; please go ahead sir.

Gary Burnison – Chief Executive Officer

Good afternoon and thank you all for joining us. There is a saying that there can’t be spring without winter and I think that’s probably the best way to summarize the climate facing most global businesses over the last several months. It is certainly not news to those that are listening on this call that our industry, the global capital markets and most businesses have been under siege since the fall of 2008. In the first quarter, the AESC our trade organization reported that the executive recruiting industry is down over 40% from the prior year. Unfortunately that environment has had a significant impact on our top line. Yet despite the drop in demand, Korn/Ferry is successfully maneuvering through this historic global recession. We moved immediately and decisively to align our business against this unprecedented industry fall out reducing our annualized cost base by over $300 million in five months, while preserving our top line capacity. Although we experienced about a 14.5% decline in revenues in the fourth quarter on a constant currency basis, the impact of our efforts allowed us to generate $36 million in additional cash. Further the company’s balance sheet is well fortified. We finished the quarter ahead of forecast with $326 million in cash. In March, Kennedy Information the leading industry analyst reported that Korn Ferry once again maintained its top spot for 2008. In addition to being the global leader in executive recruitment, our non-search solutions are increasingly being utilized by clients. In fact our readership business continued to outperform the other business segments in the quarter. This last quarter that business reached almost $18 million in fee revenue and we finished the year on a run rate of about $71 million. Lominger in particular continues to show the uncapped possibilities of extending our brand. Although revenues were about flat for the year which reflects the overall economy, we did amass a $6.4 million in operating profits from this business which is an operating margin of about 30%.

Overall our business has stabilized over the past three months. In May new business was slightly better than April. However with some (inaudible) we expect there to be slowness across all businesses not just Korn/Ferry over the next several months. There is no doubt that the past 12 months have been an extremely trying time for all businesses. But there is just that in the past. Great companies make their best moves in these kinds of market. We are moving forward. Our focus continues to be preserving the franchise, positioning the company for growth and accelerating through the economic turn. Our strategy can be summarized in five broad areas. First we have to continue to institutionalize how we go to market. We have worked hard and to enhance our processes and to embed our intellectual property into our search process. We have done a good job of integrating our non-search offerings and providing our call rates with on going training and development on a broader suite of solutions. This year we are going to continue to take share and develop deeper, more meaningful relations with our clients. We are going to continue to extend in our way the Korn/Ferry brand. Over the next 12 months we are going to continue to target growth from our largest global and regional accounts. Proactively identifying our top shelf global clients that we want to pursue and allowing the resources in the organization to go after those opportunities. We are going to continue to accelerate the growth in Futurestep in our leadership businesses. We believe that there is a significant opportunity awaiting Futurestep. If you look over this past year, it is interesting our largest client was Futurestep. If you look at our top 11 clients, 4 of them came from our Futurestep business. With the last round of downsizing in many organizations throughout the world we have seen companies trim and be more than trim and certainly resizing administration and recruitment functions and are just not rebuilding them. This provides a great avenue for Futurestep to provide outsource solutions to those organizations. We are going to continue with that pursuit.

And in the leadership business we are going to continue to integrate those offerings with our search clients as well as drive growth within that business. In addition to pursuing the consultative services within our leadership offering we are also going to develop more scalable and leveragable product in license offering. It has been proven through the acquisitions that we’ve done, particularly in the Lominger business that those are more scalable businesses and we can grow them in any kind of economic climate. Fourth we are going to pursue transformational opportunities along the broad HR spectrum. I am quite pleased by the growth in contribution of the four acquisitions that we’ve made over the last three years. And finally we are going to invest in our most precious natural resource which is our people, continuing the training, call lease, consultative selling, performance management and employee engagement. As I said there is no doubt that this has been a trying time for all businesses. But despite the economic climate and ironically because of it, I’ve never been prouder of our organization. I’m confident that the combination of our entrepreneurial attitude, our fortified balance sheet along with the seeds that we’ve planted for further transformation, are going to yield great things for Korn/Ferry. We are going to extend our reach and the value we provide for clients and we’ll continue to achieve above average industry growth rates and returns for our shareholders.

Before I turn the call over to Mark Neal and Gregg Kvochak our VP of finance, I’ll like to introduce our new CFO Mike DiGregorio. Over his career Mike has worked for both public and private companies both in the roles of CFO, and COO, started his career in Deloitte Institutions and for many years with Gillette now P&G. Mike started just literally about a week or so ago so his comments will be brief. But Mike could you say a few words first?

Mike DiGregorio – Chief Financial Officer

Sure, thanks Gary. It’s a pleasure to be speaking with all of you today. I’m truly delighted to have joined such a world class organization. Having spent the majority of my career in industry leading companies I’m familiar with the strengths and advantages that a company of strong brand. Korn/Ferry is the recognized leader in global executive recruitment and a fast up and comer in the broader talent management arena. I look forward to personally contributing as we continue this exciting transformation. As Gary mentioned I just started a week ago so at this point I’ll not be stating the fourth quarter and year end results but I’ll be talking with you plenty in the future. Meanwhile as you know we have a strong experienced financial team with Gregg Kvochak and Mark Neal and they will be delivering today’s financial remarks. So at this point I look forward to turning it over to Mark. Mark?

Mark Neal – Principal Accounting Officer

Thanks Mike and good afternoon everybody. As Gary said current marketing conditions around the world remain challenging. On a constant currency basis, Korn/Ferry’s fiscal ’09 fourth quarter fee revenue fell 43.5% or nearly $91 million versus the fourth quarter of fiscal ’08 and 14.5% or $19.9 million sequentially to $107 million. On the same basis for all of fiscal ’09 fee revenue contracted over 16.5% or $131 million to approximately $638 million. The good news is that within the quarter, the pace of sequential fee revenue decline has slowed substantially. Additionally despite the decline in the top line, the firm has continued to generate positive cash flow. At the end of the fourth quarter the firm’s worldwide cash and marketable securities balance was over $326 million, up over $36 million from the end of the third quarter. Our firm continues to be the most liquid and well capitalized in the industry with substantial financial resources to weather a prolonged recession. As previously announced we’ve taken aggressive actions to rationalize the firm’s cost base for the projected near-term volume of revenue while maintaining critical consultant and execution talent necessary to take advantage of the longer-term surge in the demand for our services that typically follows a recession. These cost saving actions have resulted in approximate 30% reduction in our global employee base, with consolidation of office space in select locations and reduction of various other G&A expenditures. Combined these actions are projected to result in an annualized pre bonus cost savings of nearly $185 million when compared to the annual run rate in the first quarter of fiscal ’09.

The full effect of these cost savings are expected to be realized in the first quarter of fiscal ‘10. Restructuring charges to achieve these savings were approximately $42 million of which $25.1 million or $0.34 per share was incurred in the fourth quarter. This charge is comprised of $13.4 million of severance pay and $11.1 million of facility consolidation related expenses. The cash flow impact in the fourth quarter of all restructuring actions completed in the third and fourth quarter was approximately $12 million. Excluding the impact of all restructuring charges pro forma fourth quarter operating loss was $8.9 million down $29 million year-over-year and down $14.4 million sequentially. Given the difficult market conditions management believes that the most relevant current operating measure is the firm’s ability to maintain and generate cash. Internally we are managing the firm’s positive EBITDA plus the amortization of stock compensation and other long-term deferred compensation costs. During the fourth quarter the firm generated approximately $100,000 of EBITDA plus long-term incentive compensation amortization. Excluding restructuring charges fiscal ’09 fourth quarter loss per share was $0.11 down $0.47 versus the fourth quarter fiscal ’08 and down $0.19 sequentially. For the full year on the same basis and excluding the non-operating investment losses incurred in the third quarter associated with the firm’s deferred compensation program, earnings per share were $0.63 down $0.83 year-over-year. On a GAAP basis fiscal ’09 fourth quarter and full year losses per share were $0.45 and $0.28 respectively.

At this point I would turn it over to Gregg and he will go through some of the segment information.

Gregg Kvochak – Senior Vice President

Thanks Mark. Starting with the executive recruitment segment, on a constant currency basis fiscal ’09 fourth quarter fee revenue fell $77.6 million or 43.7% year-over-year and $17.6 million or 15.2% sequentially. All executive search operating business especially practices were down both year-over-year and sequentially. As previously stated despite the on going economic headwinds the overall pace of sequential fee revenue decline has decelerated significantly. Executive search fee revenue and new business confirmations were essentially flat over the three months of the quarter February through April. For all of fiscal ’09 on a constant currency basis, executive search fee revenue was off $120 million or 17.7%. In North America fourth quarter fee revenue was $56.9 million down 42% or $41 million year-over-year and down $10.1 million or 15% sequentially. All major specialty practices were down year-over-year and sequentially. The most difficult specialty market continued to be financial services followed by the technology and industrial markets. The North American consumer goods and education practice were essentially flat versus the third quarter. For the full year North America executive search fee revenue fell $65.4 million or 17.4% to $309.5 million. Underlying market conditions in Europe remained depressed in the fourth quarter. On a constant currency basis Europe’s fourth quarter fee revenue declined 51% or $25.5 million year-over-year. Sequentially on the same basis Europe’s fee revenue fell 21.4% or $6.5 million in the fourth quarter. All individual country markets and all specialty practices contracted in the fourth quarter both year-over-year and sequentially. In the larger markets both the U.K and Germany were off 34% and 32% respectively while France was off 15%. For the full year on a constant currency basis Europe fee revenue fell approximately 17.6% or $32 million.

In the Asia-Pacific region constant currency fiscal ’09 fourth quarter fee revenue was off 49% or $11.5 million year-over-year and 14.8% or $2 million sequentially falling to $10.1 million. All Asia Pacific country markets fell year-over-year and sequentially in the fourth quarter. Sequentially Australia and China performed best and were off only 5% and 3% respectively. Financial services, remains the toughest market in Asia-Pacific off 70% year-over-year and off 35% sequentially. For all of fiscal ’09 on a constant currency basis Asia-Pacific fee revenue was off 27.4% or $26.3 million.

In Latin America fourth quarter fee revenue measured in constant currency was off 15.8% or $1 million and 8% or $450,000 sequentially. For all of fiscal ’09, on the same basis Latin America fee revenue was up 1%. The total number of executive search consultants at the end of the fourth quarter was 460 down 37 sequentially and 54 year-over-year. The average fee per search was approximately $75,000 in the fourth quarter and was down 17% sequentially and 22% year-over-year. Annualized fee revenue production per consultant fell 17% sequentially and 47% year-over-year to approximately 708,000. Excluding restructuring charges of $19.4 million consolidated executive search pro forma operating earnings were $3.3 million down $24 million year-over-year and $12.9 million sequentially. Consolidated executive search operating margin was 3.6% compared to 15.4% in the fourth quarter of fiscal ’08 and 14% in the third quarter of fiscal ’09. For all of fiscal ’09 pro forma consolidated executive search operating margin was 14.3% versus 18% for all of fiscal ‘08. In the fourth quarter and excluding restructuring charges consolidated executive search operations generated approximately $1.3 million of EBITDA plus long-term incentive compensation amortization.

Now turning to Futurestep, measured on a constant currency basis, fourth quarter fee revenue fell 42% or $12.9 million year-over-year and 11% or $2.2 million sequentially to $15 million. Geographically this was weakest in North America where fourth quarter fee revenue was off 54% year-over-year and 27.5% or $2.1 million sequentially. Sequentially on a constant currency basis, Futurestep Asia-pacific was up 7.7% or $400,000 while Europe was down 13% or $800,000. For the full year Futurestep consolidated fee revenue dropped only 9.8% or $11 million on a constant currency basis. Excluding restructuring charges Futurestep’s operating loss in the fourth quarter was $2.1 million versus a loss of $2.5 million in the third quarter. Futurestep absorbed $5.6 million of restructuring charges in the fourth quarter and is continuing to lower headcount and G&A expense with the goal of achieving near-term cash flow breakeven. In the fourth quarter Futurestep incurred an EBITDA plus long-term incentive amortization loss of $1.2 million.

Let me now comment on our outlook for the first quarter of fiscal ’10. The global economic crisis has had significant impact on many of our client’s human capital initiatives. Demand for executive searches, leadership and talent consulting and project based professional recruiting has declined sharply since October 2008. Although the demand for our services began to stabilize, the macro economic environment and labor markets remaining uncertain and therefore our revenue visibility remains challenged. However based on new business trends since the end of fourth quarter and considering the anticipated decline in new business in the summer due to seasonality fiscal ’10 first quarter fee revenue will likely range from $90 million to $100 million. Furthermore the firm’s operating goal in the short run is to maintain positive cash flow as defined by the measure EBITDA plus long-term incentive compensation amortization. Finally given the continued uncertain economic environment the firm will be taking additional less significant actions to rationalize the cost base to maintain positive cash flow. That concludes our prepared remarks and we will take your questions.

Operator

Thank you. (Operator instructions) Ladies and gentlemen if you wish to ask a question press * then 1 on your touchtone phone. You’ll hear a tone indicating you’ve been placed in queue. You may remove yourself from queue at anytime by pressing the pound key and if you are using a speaker phone we ask that you pick up your handset before pressing the numbers. Once again if you wish to ask a question press * then 1 at this time. Our first question is from the line of Andrew Fones from UBS. Please go ahead.

Andrew Fones – UBS

Yes thank you. Obviously I understand that the revenue flows in a little bit behind the confirmation. You said confirmations were flat month-over-month through the fourth quarter but you are guiding to a little bit lower revenue for the first quarter. Did you see a drop off in confirmations in May or is it just that riding effect of the revenue behind confirmations? Thanks.

Gary Burnison – Chief Executive Officer

Thanks Andrew. Well, it is a little bit of a lagging effect. May was actually better on balance than April but one month doesn’t make a trend and our belief is that many businesses this summer are certainly going to some time and pause. I mean so we are anticipating in the summer month’s sluggishness and so that’s what going into the forecast.

Andrew Fones – UBS

Okay and then in terms of the further cost cutting initiatives you said it is going to be less than what you saw in the last two quarters. Would you still be anticipating shirking off this and could you give me a small number in terms of headcounts and will that be borne through the back offices and how should we look at that?

Gary Burnison – Chief Executive Officer

Well we’ve now for several months we have said that the operating boundary of the business needs to be cash flow as measured by EBITDA and the amortization of long-term incentive and the fall off that we saw in late October early November was clearly unprecedented. I think we reacted immediately and decisively. In terms of our operating plan right now we do not foresee any kind of mass reductions in either our real estate or work force like we’ve done over the last several months and its more continuing to work on the cost base. Our focus needs to be on the top line. I absolutely believe that great companies make their best moves in times like this. This is why we have been so careful with the cash and the balance sheet and that’s what we are intending to do.

Andrew Fones – UBS

Okay just regarding the cash and the balance sheet how much do you expect to pay in bonuses here and can I ask what the bonus accrual was in the fourth quarter?

Mark Neal – Principal Accounting Officer

Sure the bonus accrual of fourth quarter was $4.5 million and you should be thinking in terms of roughly $90 million of bonus payout in fiscal ’09.

Andrew Fones – UBS

Okay thanks and then just following up to your answer to the first question in terms of a little bit in terms of pick up in May and obviously we don’t want to get too carried away here but in terms of areas of improvement what did you see? Was there anything notable in terms of practices or geography? Thanks.

Gary Burnison – Chief Executive Officer

Well I’d just caution you to…again one month doesn’t make a trend. So, I certainly wouldn’t draw any conclusions. We’ve not drawn any conclusions from that performance. Generally speaking May was better in Europe than April. Some of that could be holidays and Asia and North America were only slightly better than April.

Andrew Fones – UBS

Okay thanks.

Operator

Thank you. Our next question comes from the line of Kevin Mcveigh from Credit Suisse. Please go ahead.

Kevin Mcveigh - Credit Suisse

Right thank you and I see that you are in a very, very difficult environment and I appreciate your framing out some of your guidance and not to try to get too precise on the operating line but $90 million to $100 million, I’m trying to assess what the incremental cost savings will be in the first quarter show? I mean my question is here does the $107 million translate into loss of about $0.11 in the fourth quarter excluding the charges? Is 90 to 100, what should that range be on the EBIT line given the incremental cost savings as a result of the actions you have taken? Thank you.

Gary Burnison – Chief Executive Officer

Yeah I mean broadly speaking we are not giving earnings guidance. So, I think that’s a fair question. There is clearly going to be in the first quarter some operating savings reduction in expense that is right in the stage for what’s happening from the prior actions that were rolled through in the first quarter that will help to offset that deterioration in the top line assuming that the summer must turn out to be quite cyclical. At the same time you’ll probably see a slightly higher bonus provision in the first quarter than you did in the fourth quarter.

Kevin Mcveigh - Credit Suisse

Got it and Gary if we could the components of the cash 326 how does it break down in terms of what you can use versus what is more longer term in nature?

Gary Burnison – Chief Executive Officer

Sure. If you take the $326 million and you roughly deduct $90 million for the bonus expense you will come to about $237 million of net cash and from that about $62 million is in reserve in our ECAP program. So, the balance which would be about $175.5 million or so would be what you consider useable and investable cash. Does that make sense to you?

Kevin Mcveigh - Credit Suisse

Sure that makes a lot of sense and then Mike I know you haven’t been here all that long but I wonder if you could give us your initial thoughts on what do you think of Korn/Ferry and what do you intend to focus on with the caveat that you have been there less than two weeks?

Mike DiGregorio

Yeah I think it is as everybody said a very unique time in any business environment and I think fundamentally the general focus is on generating positive cash flow and so as we said we know we are starting to take some other cost saving actions. We are going to be very vigilant to continue to look at this and control the cost base and we are confident in time that top line will start moving up but the short-term focus is going to be on maintaining strong cash balances and liquidity and keeping in the block on cash.

Kevin Mcveigh - Credit Suisse

Right, thank you.

Operator

Thank you. Our next question is from the line of Tobey Sommer from Sun Trust Robinson Humphrey. Please go ahead.

Tobey Sommer – Suntrust Robinson Humphrey

Hi this is Frank in for Tobey. Good afternoon.

Gary Burnison – Chief Executive Officer

Good afternoon, Frank.

Tobey Sommer – Sun Trust Robinson Humphrey

I wanted to ask I guess a little bit about the pricing environment. We saw a little bit of decline in the average fee. Can you talk about kind of what’s going on there and maybe by either segment or sector?

Gary Burnison – Chief Executive Officer

Yeah I think to get at that granular would be difficult but I’ll give you some broad parameters. Overall first of all there is no wage deflation at the top of the house. If you look at the fortune 500 for example, there has only been isolated examples of salary reductions. If you look at the fortune 500 and talk about long-term incentives we have seen that the packages could be 10%, 20%, 30%, long-term incentives could be less than say the prior year. So, there is a little bit of that but generally speaking we are not really seeing wage deflation. The decline in the average fee is really coming about because of the environment, the competitive environment that we are operating in whereby literally in the last part of October, early part of November this industry fell off dramatically and so certainly there has been pressure on expenses and the like but I would not take this trend that we can extrapolate out on that long-term in terms of this industry because we just can’t see wage deflation. We continue to see that there will be a shortage of skilled executives globally over the next decade.

Tobey Sommer – Sun Trust Robinson Humphrey

Okay great that’s helpful and you mentioned sectors that were experiencing weakness in financial services and technology. Can you go into it? Is it the rate of weakness stabilizing at all or is there some areas that you are seeing changes in there?

Gary Burnison – Chief Executive Officer

Well if you look sequentially it is very difficult because the business, you are recognizing revenue over a several month period and so what you are seeing in the quarter is the lag effects of just this Draconian, incredible drop off that this industry experienced in late 2008. Broadly speaking you look at the numbers that we just reported and sequentially quarter four compared to quarter three or the April quarter for us compared to our January quarter, you look and it is fairly consistent in terms of the decline. I would say that some of that too is driven by that. I mean that had a significant impact on this company over the last four five months. We are seeing green sprouts. Again I don’t know if a few weeks or a month makes a trend. In financial services as we are seeing more activity. We are seeing clients not be blasé about resignations. We are seeing them trying to keep people. We are also seeing activity from foreign based institutions that are aggressively trying to establish their B check in the United States. So, those two trends in financial services are interesting but again I don’t think I would extrapolate that out.

Tobey Sommer – Sun Trust Robinson Humphrey

Right great. Thank you very much.

Operator

Thank you. Our next question is from the line of Jeff Mueler from R.W.Baird. Please go ahead.

Jeff Mueler - Robert W. Baird

Good afternoon. It is Jeff Mueler from Baird in for Mark Marcon. I had a follow up on the prior question. In terms of the average fee for search decline are you seeing more pay caps? Are you doing more lower level searches and how does the dynamic compare to the prior downturns?

Gary Burnison – Chief Executive Officer

Yeah the prior downturns were interesting. You kind of had when you look at it, I am going off the top probably 4% or 5% or 6% kinds of declines in average fee. This one is certainly more significant. You can talk about caps and you can talk about expenses. I’ll tell you almost every CEO for the last six months, cash is just not king, it is God. And so there has been such a heavy focus on businesses around the world to maintain their cash position that they have been steadily cautious and when they do have mandates have been conservative in how they want to approach that.

Jeff Mueler - Robert W. Baird

Okay and then you obviously have a lot of cash available even if you have to shell out for bonuses and ECAP. There has been some well publicized rumors of a potential acquisition. Could you talk about your appetite for acquisitions at this point of the cycle and whether they would be in the traditional core executive search business or more along the lines of Futurestep or in the Leadership Consulting?

Gary Burnison – Chief Executive Officer

Broadly speaking we want to continue to give our consultants and partners and colleagues reasons to talk to clients throughout the whole year. Solutions and services to differentiate our flagship business, that’s the strategy of this company. We have been very pragmatic and disciplined in terms of looking at opportunities that not only move the brand upstream but make it more elastic. We do not comment publicly on rumors or acquisition activity or stock buy backs. So, it is not something that we do publicly. I will tell you however that I again believe that the time that you plan stage for change is in this kind of environment whether that deals with the strategy of a company, whether it deals with cultural transformation you try to pull off when it comes up for operating talent. If your balance sheet is fortified this is a very interesting time.

Jeff Mueler - Robert W. Baird

Okay and on an apples-to-apples basis with that 175 million, is there a level of cash that you will not want to drop below?

Gary Burnison – Chief Executive Officer

Well, that was seven years ago. You’ll have to appreciate that. We wouldn’t want to do this again but I think the cash balance got to you as well is great and correct me if the numbers are 90 million or some number and the company had about 50 million of bank debts. So, we have in the past operated at that level but it is not the way that we are playing the game here. And so we have conservatively looked at wanting to keep working capital around the world of $40 million, $50 million.

Jeff Mueler - Robert W. Baird

Okay and then what do you expect for non-cash comp expenses in fiscal ’10?

Gary Burnison – Chief Executive Officer??

Yeah that would be about $15.5 million of stock compensation and then maybe another $7 to $7.5 in other long-term incentives as it relates to our deferred compensation program, the ECAP program.

Jeff Mueler - Robert W. Baird

Okay thank you.

Operators

Thank you. It appears there are no further questions Mr. Burnison.

Gary Burnison – Chief Executive Officer

Well thank you. Look this is the word unprecedented has been used. It has almost become a cliché but we are not proud of the top line of this company or the EPS but the reality is we were dealt a deck of cards and so was the industry. We believe that we reacted immediately and decisively and although we are not necessarily proud of the top line, I am incredibly proud of our organization and how we are dealing with this. So, our view, our eye is not on the rear view mirror but it is on the wind shield and so we are continuing to maneuver this unprecedented storm and we look forward to continuing to expand our suite of services and extending the brand, leading the brand upstream and continuing to transform Korn/Ferry. So with that, thank you very much for your time this afternoon.

Operator

Thank you. Ladies and gentlemen this conference will be available for one week starting today at 4:00 p.m. Eastern daylight time and running through the day June 23rd at midnight. You may access the AT&T executive playback service by dialing 1-800-475-6701 and entering the access code 103502. International participants may dial 320-365-3844 and use the same access code 103502. Additionally the replay will be available for playback at the company’s website www.kornferry.com in the investor relation section. That does conclude our conference. You may now disconnect.