Earnings Call Transcript - KFY Q4 2023

Operator, Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Korn Ferry Fourth Quarter and Fiscal Year Ended April 30th, 2023 Conference Call. At this time, all participants are in a listen-only mode. Following the prepared remarks, we will conduct a question-and-answer session. As a reminder, this conference 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 we 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 statement within the meaning of the Private Securities Litigation Reform Act of 1995. Although the company believes the expectations reflect 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 risk factors 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 and other reports filed by the company with the SEC, including the company's soon to be filed annual report for fiscal year 2023. 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 measures 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 Gary Burnison. Please go ahead, Gary.

Gary Burnison, CEO

Hello, they just sent me a text. I'm going to come, dial back in over to you. We’ve got lowest everybody is on the line, number one. Good afternoon and thanks for joining us. Our team is going to get into the numbers in a moment. But I first wanted to start by saying how incredibly proud I am of our firm, of our colleagues, of our purpose to enable people and organizations to be more of that, and the results of our diversification strategy, which is clearly working as we had planned. And so, for example, while we've experienced a drop in the search business from post-pandemic highs, the rest of the portfolio performed as expected. With RPO less cyclical, digital, and consulting growing and our new interim business really blossoming. In fact, over the last 18 months or so, we've added this new interim capability, which has about $400 million of annual revenue on a run-rate basis, bringing our total professional search in interim business to approximately $550 million to $600 million on a run-rate basis, and that's the direct result of our strategy. Anticipating over three years ago, a workplace mobility that we thought would emerge post-pandemic, and it has. Tectonic shifts are happening everywhere. How we produce and consume? Where and how we work? How we're entertained? An ongoing war shifting trade lanes, inflation, interest rate rises at a rate we haven't seen in a long, long time, and now Generative AI. These megatrends can result in change that's fundamentally good for our clients and for Korn Ferry. And it's interesting to reflect that the foundation of our firm began with IP and science. With a world immersed in Generative AI, we will continue to invest not only in these technologies but also in our proprietary data, assessment instruments, and knowledge, and these will be the ultimate differentiators. Amid this transformation and change, I believe, we're still at the very beginning of what Korn Ferry will be, with therefore much more tangible opportunity ahead to help our clients to be more of that. With that, I'll turn it over to Bob Rozek.

Bob Rozek, CFO

Great, thanks, Gary, and good afternoon or good morning, depending where you are. As I've said before, despite the substantial progress we've made evolving the business, I really believe that we're still in the early innings of this transformative journey. As Gary mentioned, the strategy is working; it's producing the growth and results we set out for, which really are the proof points that the strategy is, in fact, working. With what has become an ongoing backdrop of macro uncertainty, the execution of our strategy has produced another successful year with organic and inorganic growth resulting in an all-time high of slightly more than $2.8 billion in fee revenue. If I go back two short years to fiscal ‘21, which is a year of the pandemic, our fee revenue has grown by more than $1 billion in that time and 70% of that growth came organically, with the rest coming inorganically. Our consulting business showed resilience throughout the year, bolstered by the relevance of our larger integrated solutions. Our digital business also showed resilience, while continuing its transformation from selling analog point solutions to licensing our digital performance management tools. RPO remains extremely well positioned with its strong track record of large new business wins and I expect that business to return to robust double-digit growth when a lot of the uncertainty that we're seeing today clears. Demand in Executive Search in the perm placement portion of professional search moderated in the second-half of last year. But at the same time, demand in interim remained steady, and that offset some of the transitory softness in the perm placement businesses. Synergistic referrals between interim and perm placement plus referrals between our other lines of business and our marquee and regional accounts were significant contributors to the achievement of our FY ‘23 annual fee revenue. So again, it's clear to me, our strategy is working. So we're going to continue driving our integrated solution-based go-to-market strategy, including our marquee and regional accounts, delivering unparalleled client excellence, extending our very strong Korn Ferry brand, advancing Korn Ferry as the premier career destination, and continuing to pursue transformational opportunities at the intersection of talent and strategy. With that, let me turn the call over to Gregg, who will take you through some of the overall company financial highlights.

Gregg Kvochak, CFO

Thanks, Bob. In the fourth quarter, global fee revenue was $731 million, up 8% year-over-year, and up 12% at constant currency. By line of business, fee revenue continued to moderate from post-pandemic highs for our permanent placement talent acquisition solutions, Executive Search, professional search, and RPO. However, other lines of business remained stable in the quarter. Measured year-over-year at constant currency, fee revenue was up 3% for consulting, up 5% for digital, and aided by our recent acquisitions of ICS and Salo, fee revenue for our Interim Services grew $70 million year-over-year. Consolidated new business in the fourth quarter also moderated and was down 4% year-over-year at actual foreign exchange rates and down 2% at constant currency. Consistent with fee revenue, new business in the fourth quarter moderated most in Executive Search and Professional Search. In line with our guidance, earnings and profitability also moderated in the fourth quarter. Adjusted EBITDA in the fourth quarter was $98 million with an adjusted EBITDA margin of 13.4%. Earnings and profitability in the fourth quarter were impacted by a number of factors. These factors include the mix shift in fee revenue by line of business, startup costs associated with the ramp-up of newly awarded large RPO assignments, investments in headcount to preserve fee-generating and execution capacity, and product development initiatives for digital. Our adjusted fully diluted earnings per share in the fourth quarter were $1.01 down $0.74 or 42% year-over-year. Adjusted fully diluted earnings per share exclude $6.9 million or $0.10 per share of restructuring charges related to the cost true-up of actions taken in the third quarter and integration and acquisition costs associated with our recent acquisitions. GAAP diluted earnings per share in the fourth quarter were $0.91. Our investable cash position at the end of the fourth quarter remained strong at $488 million, and our capital allocation continues to be well-balanced. For all of fiscal '23, we deployed $490 million of cash, using $94 million for share repurchases, $33 million for dividends, $62 million for capital expenditures, $255 million for M&A, and $19 million for debt service. Now I will turn the call over to Tiffany to review our operating segments in more detail.

Tiffany Louder, Segment Head

Thanks, Gregg. Starting with KF Digital. Global fee revenue in the fourth quarter was $91 million, which was up 2% year-over-year and up 5% at constant currency. Digital subscription and license fee revenue in the fourth quarter was $32 million, which was approximately 35% of fee revenue for the quarter. The accumulation of sales of subscriptions over time has created year-over-year growth in subscription-based revenue, with increases in both sales effectiveness and total rewards tools. Global new business for KF Digital was $101 million, with $35 million or 35% of the total tied to subscription and license sales. For consulting, fee revenue in the fourth quarter grew to $175 million, which was flat year-over-year, although both periods are all-time high, and up approximately 1% at constant currency. Fee revenue growth was strongest in organizational strategy, followed by assessment and succession and rewards and benefits. Additionally, global new business for consulting in the fourth quarter was down slightly, 4% year-over-year at constant currency with mid-single-digit growth in EMEA. The Professional Search and interim business increased 40% in the fourth quarter versus last year, driven by double-digit strength in North America and aided by the current year acquisitions. Total fee revenue was $152 million, up $51 million or 50% over the same time period. Breaking down the quarter, growth in the interim business was more than enough to offset moderation in the permanent placement portion of the segment. Interim services fee revenue grew to $89 million from $20 million in the same quarter of the prior year, driven primarily by the recent acquisitions. Permanent placement fee revenue declined by $18 million to $63 million year-over-year, down 23% at actual and down 22% at constant currency. Moving on to recruitment process outsourcing, new business for the fourth quarter was strong once again at $115 million and total revenue under contract at the end of the quarter was approximately $777 million. Fee revenue totaled $100 million, which was down $13 million or 11% year-over-year and down approximately 9% at constant currency. Although, we are seeing notable sequential improvement within life sciences, overall fee revenue is impacted by a moderation in hiring volume from all other industries in the base and backlog. We see this slowdown as transitory and believe RPO is well-positioned to benefit with hiring returning to more normalized levels in the base and the larger, more recent wins begin converting to revenue. Our pipeline remains strong as RPO continues to win new business, the differentiated service offering in the marketplace. Finally, global fee revenue for Executive Search in the fourth quarter was $213 million, and as expected, experienced a year-over-year decline of 11% at constant currency compared to the high growth rates enjoyed during the pandemic recovery last year. Demand continued to moderate most notably in North America and APAC, followed by EMEA and Latin America.

Bob Rozek, CFO

Great. Thanks, Tiffany. Assuming no new or further changes in worldwide geopolitical conditions, economic conditions, financial markets, and foreign exchange rates, we expect fee revenue in the first quarter of fiscal ‘24 to range from $668 million to $698 million. Our adjusted EBITDA margin to be approximately 13.5%, and our consolidated adjusted diluted earnings per share to range from $0.84 to $1. Finally, we expect our GAAP diluted earnings per share in the first quarter to range from $0.78 to $0.95. In closing, I want to thank all of our colleagues for just an absolutely tremendous year. We continue to believe our portfolio of distinctive organizational consulting solutions, which are based on our deep proprietary IP and data delivered by our world-class colleagues will continue to differentiate Korn Ferry on our journey to become the preeminent organizational consultancy. With that, we would be glad to answer any questions you may have.

Operator, Operator

Thank you. And our first question comes from George Tong from Goldman Sachs. Please proceed.

George Tong, Analyst

Hi, thanks, good afternoon. The consulting and digital businesses were relatively resilient this quarter, particularly when compared to exec search and perm placement. Can you discuss the broader selling environment across these business lines and walk through where you're seeing the most change, and what assumptions you're currently reflecting in your fiscal 1Q outlook?

Gary Burnison, CEO

The amount of change that is happening is breathtaking. And from the days of darkness and COVID to economic changes to geopolitical changes to the fact that the U.S. labor force and other Western economies, the number of people in the workforce really hasn't changed. So there continues to be this move towards upskilling towards retaining, developing talent. And if you look at fundamentally what we are doing, we're providing solutions for individuals and organizations to be successful. So whether it's employee fit, coaching, development, methodology, compensation, and design, you name it, that's kind of where Korn Ferry is playing today. And when you look at the results, it's absolutely in line with the very beginning of the strategy. And so you're seeing an environment where the world came to a halt, there was incredible demand on all fronts in many, many industries. And you saw the Executive Search business had a huge, huge upswing. And what we're seeing here is a significant moderation of search, a decline in volume. It's interesting to note that basically where we are today in search was essentially where we were pre-pandemic. Revenue is up a little bit more than where we were pre-pandemic, but volume is a little bit down. But what you're saying is the cyclical parts of the business, the search business are seeing that drop in demand that you would expect, but RPO is less cyclical than search, and consulting, digital, and interim are all less cyclical than RPO and search. So it's playing out exactly as we thought. And what I've seen over the last few months is a stabilization of search, which is good. In May, we saw a rebound in China. And so our main new business overall was up 5%, search was down about 12%, but consulting and digital were up. And so, essentially, it's playing out as we called for in the strategy; the marquee and regional accounts were almost 40% of our new business. So is the market different than it was a year ago? Yes, absolutely, it's different than a year ago. But a year ago, people were coming out of darkness and there was this huge amount of activity across industries. So it is different than a year ago. But I think I'm really proud of where the organization is and the results kind of bear out the strategic thesis that we had all along.

George Tong, Analyst

Very helpful. Separately, you noted that interim search trends remained relatively steady. If you look at other interim staffing providers even in the higher-end IT sector, they've been seeing some revenue headwinds and year-over-year revenue declines. Can you discuss what's driving the positive separation of Korn Ferry's interim search business and staffing business compared to competitors?

Gary Burnison, CEO

I would expect some moderation. We're not going to be immune, but it is a large market, a huge market. People are changing the way they work. We saw an opportunity in April, May, and June of 2020 and made a conscious decision to enter the market significantly, especially in finance and accounting, technology, HR, and supply chain. We aimed to expand rapidly in a very short time. Our business has developed to a high level, with an average hourly rate of $124. I'm not suggesting we're immune, but one advantage we have is the amount of cross referrals. Over an 18-month period, we've generated almost $50 million from cross referrals and nearly 700 deals. Some other firms strictly focused on that business lack the broader platform of Korn Ferry, and I believe that will continue to be a differentiator. However, I'm not claiming we'll be unaffected by the trends others are experiencing in interim services.

George Tong, Analyst

Thank you.

Operator, Operator

Thank you. Our next question will come from the line of Tobey Sommer from Truist Securities. Please go ahead.

Jasper Bibb, Analyst

Hey, good morning. This is Jasper Bibb on for Tobey. I just wanted to ask how you're thinking about the long-term EBITDA margin targets, just given, as you know, we've seen the mix of lower margin interim and RPO come up as well as the company has been able to continue to take fixed cost out of the business. So do you think that 18% to 19% range is still feasible, or would it potentially be lower than that now? Thank you.

Gary Burnison, CEO

Bob will address that question directly, but let me provide some context. This firm has grown from below $300 million to $3 billion, and I can assure you that we have consistently improved performance from peak to peak, cycle to cycle, and trough to trough. This is supported by data. Additionally, we've made a strategic choice to focus on a significant market opportunity that we believe will be beneficial for shareholders and our team in the coming years, specifically in interim services. Considering that and our increasing focus on RPO, it's important to note that there is about a 200 basis point difference when we review past performance. Before the pandemic, if I recall correctly, we were achieving EBITDA margins around 14.5% to 15.5%, followed by a substantial increase last year. I believe that any models or boundaries must be adjusted by a couple of hundred basis points to reflect the changing business mix as we move forward. Bob, could you share your thoughts on the specific operating boundaries for the firm?

Bob Rozek, CFO

Yes, sure. Thanks, Gary. And I think, as I said in the remarks, Q1, we expect to be kind of 13.5%. And I would say for the near-term, we would continue to manage the business to about 13% to 14%, somewhere in that range as we're just continuing to invest in our revenue-generating capacity. If the long-anticipated recession were to occur, and again, depending on the severity, we would manage the business kind of mid to high-single-digits in a more severe downturn, and then low-double-digits in a more moderate scenario. Ultimately, from a longer-term perspective, I was going to depend on what the business looks like; if search bounces back, if digital, we get digital where we think it's capable of going to, as Gary alluded to. RPO is just continuing to win new business and become a larger piece of the pie. So, there's a lot of moving pieces. But I would say, from a long-term perspective, you should expect to see us kind of in the 16% to 18% range, so down a little bit from the 18% to 19% where we previously communicated. But I would say 16% to 18% is probably a good spot to land at this point.

Jasper Bibb, Analyst

Thanks. That makes sense. And then Gary, you mentioned generative AI in the prepared remarks. I know it's still early, but any preliminary expectations for AI risks or opportunities in the business model?

Gary Burnison, CEO

We have a comprehensive strategy in place. Firstly, let me emphasize that no one can predict the exact direction this is heading, including the industry leaders. This area has attracted significant attention for valid reasons. It could potentially have a similar impact on knowledge work as the industrial revolution did for manufacturing, although I hesitate to make that comparison. Nonetheless, it represents an important chance for us. We’re approaching this from three key angles. First, we want to leverage it proactively to enhance our impact on clients. Second, we need to assess our vulnerabilities. Third, we must identify the partnerships necessary within the wider ecosystem to help us navigate this landscape. I firmly believe that data and knowledge are critical in this business, which we have demonstrated over the years. Our teams are currently evaluating whether we are capturing all relevant data and if it is stored in a way that allows us to easily access insights for our clients. Additionally, we must ensure that our intellectual property and assessments are suitable for the evolving market over the next five to ten years, considering the anticipated labor growth and ongoing skill shortages. I believe that focusing on data, insights, knowledge, and our intellectual property is essential, as these elements will ultimately prevail, regardless of how the AI discussion evolves. We have been integrating AI into certain aspects of our recruiting efforts for a while, and there is significant potential in our learning and development sector, which is another area of focus for us. In practical terms, we will carve our path as we progress, and it is crucial that we invest adequately in the foundational aspects of our firm, including our data and intellectual property.

Bob Rozek, CFO

Hey Gary, it's Bob. I want to add to that point. When we consider where Korn Ferry excels in relation to our clients, it’s in assisting them in navigating disruption. As you mentioned, the future of Generative AI is uncertain, but the potential for disruption is clearly present. Looking back at how we've supported clients during periods of social upheaval, like COVID and the shift to remote and hybrid work, we have been there to guide them through those challenging times. I see this as yet another opportunity for us to help our clients manage disruption and keep their businesses progressing.

Jasper Bibb, Analyst

Appreciate the detail there. Last one for me. You mentioned China picked up from a search perspective a little bit in May. At least domestically, it seems like we've seen capital markets activity start to pick up a little bit of really low levels in June. Maybe it's early, but are you seeing any green shoots domestically for the search business in June, just given, I guess, the rebound in equity markets and maybe the IPO pipeline starting to warm back up?

Gary Burnison, CEO

When you say domestically, are you talking about domestic China or domestic United States?

Jasper Bibb, Analyst

Domestic United States.

Gary Burnison, CEO

One month doesn't create a trend. What we observed in May was definitely positive news. If we compare sequentially from April to May, rather than year-over-year, we typically expect new business to decline by 3% to 5%. Instead, we saw a 5% organic increase, which aligns with our expectations. For May to June, we anticipate a sequential increase of around 5%, although we haven't yet concluded June, and there's still time left in the month, along with the upcoming 4th of July holiday. So far, we seem to be on track for that figure. While it may be premature to declare any significant recovery, it's certainly more promising than before, as we've noticed a stabilization in our Executive Search business. In North America, the new business trend in May improved compared to the previous month or two. Additionally, our consulting, digital, and interim businesses have performed quite well overall.

Jasper Bibb, Analyst

That's fair enough. Thank you for taking the questions.

Operator, Operator

Thank you. And our next question is from Trevor Romeo from William Blair. Please go ahead.

Trevor Romeo, Analyst

Hi, thanks so much for taking the questions. First, I just kind of wanted to ask about fourth quarter results relative to your expectations, particularly on margins since revenue was above the guidance. EPS is kind of more in line. I think Gregg's comments had talked about the mix shift in revenue, start-up costs with some RPO engagements, investments in headcount, and product development. I was just wondering if you could maybe talk about which of those factors had more of an impact than you might have thought going into the quarter, if any? Just any kind of color on the margin performance in the quarter would be great.

Gary Burnison, CEO

Well, I'll let Bob comment. I would just say that we had guided to an EBITDA margin of 14%, and we came out at 13% and 13.5%. So it was actually fairly close to what we had expected. In any given quarter, you could have unusual items affecting the results. But we mentioned seven months ago that we were aiming to run the business at about 14%. So this is pretty close to that. Additionally, with the decline in search, there's a mix shift occurring within the organization. I think it aligns closely with what we anticipated seven or eight months ago, which we communicated to our shareholders. But Bob can probably provide a better perspective than I can.

Bob Rozek, CFO

Yes. So Trevor, if you look at whether you go quarter sequential or year-over-year, the mix shift is likely 80% of the decline that you see in the adjusted EBITDA margin. As Gary said, it's the primary driver of it in the fourth quarter because our revenues exceeded the top end of our range. We did have in our business, when a lot of the bonuses are driven off revenue. So we had to book a little bit more bonus in the fourth quarter to satisfy the demand, but the primary driver is just the change in mix.

Trevor Romeo, Analyst

Okay. Got it. Thanks. That is helpful. And then for my follow-up, just kind of wanted to ask about your M&A pipeline. I think we've heard from some other companies about a tough M&A market with disconnects on valuation between buyers and sellers. Others maybe suggesting the pipeline could open up a bit. You guys have obviously done a few acquisitions lately yourselves. Just kind of wondering where your pipeline stands today, which area you can see being attractive right now? Thanks.

Gary Burnison, CEO

We have always taken a systematic approach to capital allocation, and we plan to continue that. I don’t usually categorize our pipeline as big or small at any given moment. Instead, we focus on identifying real market opportunities and where we can make a greater impact for our clients. It’s about understanding the culture fit and evaluating the environment comprehensively. We experience cycles, both up and down, but we maintain that systematic approach and keep meeting with companies to build relationships. I don’t believe today’s situation is any different from how it was three or four months ago.

Operator, Operator

Thank you. Our next question is from Marc Riddick from Sidoti. Please go ahead.

Marc Riddick, Analyst

Hey, good afternoon. I just wanted to touch on a couple of areas that you touched on earlier, but I just wanted to follow-up on as far as the opportunities that you see before you. You talked about being willing to invest and adding talent as we go through the year. Are there any particular areas either strategically or geographically that are kind of really sort of jumping out as feeling though maybe you're understaffed or maybe missing an opportunity at this point?

Gary Burnison, CEO

There are certain regions in the world where I've encouraged our team to significantly expand our business. While I won't specify those locations publicly, it's clear that one approach does not fit all. Some countries are performing exceptionally well, and we have strong operations there, but we have only begun to tap into their full potential. You might be able to guess which ones I'm referring to. We have a very ambitious plan in a couple of key areas where we see tremendous opportunity. The consulting business is a clear area for growth, and despite our current position, I firmly believe we need to add more team members and resources in this sector. I wouldn’t want to label it as our sole focus, as there are various opportunities to explore, but overall, we have seen substantial success with our consulting and digital solutions working in harmony. This represents a multi-billion dollar opportunity for us in the medium to long term. Additionally, we possess incredible data, and we need to explore how to license that or utilize it either independently or alongside consulting to address what I believe will be ongoing organizational challenges for our clients. This is especially relevant given the current tumultuous changes in the labor market, which presents a significant opportunity for Korn Ferry.

Bob Rozek, CFO

Yes. I'll take it. So our capital spending this year will be relatively consistent with what we saw last year in FY '23. So figuring somewhere kind of $65 million to $70 million, like probably somewhere around $50 million of that going into the digital business, there will be some in the consulting business. And then the rest would go to kind of making sure that the fort protects all the assets and keeps the bad guys out. But I would look at our capex this year very consistently with what we did last year.

Operator, Operator

Thank you. And our next question is from Mark Marcon from Baird. Please go ahead.

Andre Childress, Analyst

Hello, this is Andre Childress on for Mark Marcon. Thank you for taking our questions. Could you go into some detail about what you're seeing by geography and by vertical? I think it's interesting how well EMEA has held up on the search side, at least relative to North America. And then I know previously, you said industrial was holding up pretty well, but can you give an update on what verticals might be doing well and which ones may be struggling a little bit more?

Gary Burnison, CEO

I think in EMEA, it's not just the search business; it's all sectors that are performing very well and it's quite widespread. There are several areas that are excelling significantly. So it's more than just search. In EMEA, it's evident across the entire platform. The industrial sector is crucial for us, representing nearly 30% of the company and forming a substantial part of our portfolio. Year-over-year, for instance, we’re seeing about an 8% increase here. The infrastructure act in the United States is certainly influencing this as well. Moreover, we are observing positive trends in manufacturing, energy, engineering, construction, and even the automotive sector has maintained its strength. Overall, the performance in the industrial sector has been quite broad-based, and this is encouraging for Korn Ferry given the industrial sector's significance relative to our overall portfolio.

Andre Childress, Analyst

Great color. Thank you. And then switching over to the interim side. Could you talk about maybe what roles or skills you are seeing particular success with, whether you within cross-sell or outside of that? And then also when you're looking at adding capacity both organically and inorganically, maybe what areas would you be more likely to add to?

Gary Burnison, CEO

We believe that finance and accounting technology, supply chain, and HR are key areas for Korn Ferry, where we aim to maintain a strong presence in the high-end market. This is a central aspect of our strategy, and it's been impressive to see the quality of talent we've brought on and the types of projects we're undertaking. In a short time, we have achieved a $50 million revenue increase over about 18 months and completed 700 deals. When you expand on this, the outlook is very encouraging. One of the core components of our strategy is to deliver greater value to clients through a comprehensive platform that includes organizational strategy, compensation and benefits, and leadership development. Overall, our cross-referrals account for 25% to 30% of the firm's business, and when considering marquee and regional accounts, that figure rises to 35% to 40%. This indicates that our approach is working. While we acknowledge that there may be some easing in our high-end interim services, the market potential remains substantial.

Bob Rozek, CFO

Yes, Gary, the only thing I would add to that, too, is the proclivity for Executive Search to work with the Patina folks on the C-suite interim placements. That seems to be an area that there's real synergies going on as well.

Operator, Operator

Thank you. And that does appear to be the final question. Please go ahead with any closing remarks.

Gary Burnison, CEO

Okay. Lois, thank you for moderating this. And as Bob said, we're incredibly proud of our team and we certainly appreciate you listening, and we look forward to speaking to you very, very soon. So with that, we'll sign off, and have a great day. See you. Bye-bye.

Operator, Operator

Thank you. Ladies and gentlemen, this conference is available for replay beginning at 11:00 am today and running through July 4th at midnight. You may access the AT&T replay system at any time by dialing 1-866-207-1041 and entering the access code 4932486. International dialogues can call 402-970-0847. Again, the numbers are 1-866-207-1041 and 402-970-0847 with the access code 4932486. And that does conclude our conference for today. Thank you for your participation and for using AT&T. You may now disconnect.