Ladies and gentlemen, thank you for standing by, and welcome to the Korn/Ferry International First Quarter Fiscal Year 2014 conference call. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes. We've also made available on 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 the cautionary statement to investors. Certain statements made in the call today, such as those relating to future performance, plans and goals, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although the company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, investors are cautioned not to place undue reliance on such statements. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties, which are beyond the company's control. Additional information concerning such risks and uncertainties can be found in the release relating to the presentation, in the company's annual report for fiscal 2013 and in the other periodic reports filed by the company with the SEC. Also, some of the comments today may reference non-GAAP financial measures, such as constant currency amounts, EBITDA and adjusted EBITDA. Additional information concerning these measures, including reconciliations to the most direct comparable GAAP financial measure, is contained in the financial presentation and release relating to this call, both of which are posted on the company's website at www.kornferry.com. With that, I'll turn the call over to Mr. Burnison. Please go ahead, Mr. Burnison

Okay. Well, hello, everybody, and thank you for joining us, and a happy new year. First, start out with some overall comments. I'm very, very pleased with our momentum, our operating results for the quarter, as well as the strategic progress we've made on integrating our acquisitions. Fee revenue in the quarter grew. It was about $228 million, which is up 23% year-over-year. That's up 8% on an organic basis, measured at constant currency, and that's with growth in all of our major operating segments. So today, it's a company that is at an annualized first quarter run rate of about $920 million, with about $128 million of EBITDA. As we talked about last quarter, we anticipated continued integration activities. And so in the quarter, we did complete those activities. Our adjusted EBITDA margin was 14%, and that's up substantially from the prior year. We'd like to see that be 15% to 18%, as an organization, that's what we're shooting for. Our adjusted EPS was $0.33, and that's up $0.11 from the prior year. And our balance sheet continues to be very strong. I think we've effectively balanced growth and investment. And particularly, as efficiencies and growth come from our recent acquisitions, and with our leadership team around the world effectively driving our strategy, we've improved profitability but we've also increased revenue, not only within our flagship heritage Search business, but also our broader talent management offerings year-over-year, with strong margin expansion and earnings per share growth in the quarter, on an adjusted basis. And so as a result, we're making this company more relevant. We're making our brand more elastic with, in the quarter now, 40% of the revenue mix was generated from our broader talent management offerings. And the interesting thing, I think, too, is that it also…

Thanks, Gary, and good afternoon, everyone. You could feel the pride in Gary's comments in terms of our quarter. We're all very proud of what we've done these past 3 months and I'm pleased to announce another quarter of strong results. The privacy [ph] made in the first quarter of fiscal '14 is in line with our previously discussed expectations, and is another important step in the process of accomplishing our strategic vision of creating a leading, most innovative, profitable firm in the evolving talent management industry. As the worldwide labor market gradually recovers, market demand for our firm's industry-leading talent management solutions continues to improve. As Gary indicated, in the first quarter of fiscal '14, our consolidated fee revenue grew to $228.4 million, with year-over-year growth in all of our major operating segments. Measured on a constant currency basis, fee revenue grew $2.9 million or 1.3% sequentially, and was up $43.5 million or 23.3%, compared to the first quarter of fiscal '13. Additionally, on an organic basis, excluding the impact of our recent acquisitions, both Global Novations and PDI, consolidated fee revenue in the first quarter grew $14.9 million or 8%, on a constant currency basis, year-over-year. In the first quarter of fiscal '14, 40% of our consolidated fee revenue was generated in services outside of our core Executive Search offering. And our overall growth continue to outpace many of our major industry competitors. Executive Search new business awards in the first quarter continued on an upward trend and we did start to see some narrowing in the volatility on a month-to-month basis. Confirmations were sequentially up in both May and June and slightly seasonally weaker in July, with new business in the first quarter up 16% compared to the first quarter of fiscal '13, and 5.6% compared to…

Okay. We’ll start with our Executive Recruitment segment. In a slowly improving global labor market, new business confirmations in our Executive Recruitment services showed signs of growth in the first quarter. Consolidated Executive Recruitment fee revenue in the first quarter was $136.7 million, flat sequentially and up $9.2 million or 7.2% year-over-year. Measured at constant currency, first quarter consolidated Executive Recruitment fee revenue was up 1% sequentially and up 8.2% year-over-year. Regionally, also at constant currency, Europe was up 7.2%; Asia-Pacific was up 13.7%, while North America and South America were down 4.1% and 5.2%, respectively, on a sequential basis. Year-over-year, also on a constant currency basis, North America grew 3.1%; Europe grew 15%; Asia-Pacific was up 25.3%, while South America was down 8%. Growth in our Executive Recruitment specialty practice was primarily positive in the first quarter. On a sequential basis, at actual rates, the financial services practice grew 5%, the industrial practice grew 8%, life sciences and healthcare and Consumer Goods were flat, while the technology practice was down 12%. Financial services accounted for approximately 17.5% of all Executive Recruitment fee revenue in the first quarter, up approximately 80 basis points from the fourth quarter of fiscal '13. Year-over-year, also at actual rates, all of our specialty practices grew in the first quarter, with the exception of the technology practice. Life sciences and healthcare was up 16%, financial services was up 13%, Consumer Goods was up 11% and industrial was up 6%. Worldwide, the technology practice was down 2% year-over-year in the first quarter. The total number of dedicated executive recruiting consultants worldwide at the end of the first quarter was 416, up 1 year-over-year and up 17 sequentially. The 17 consultant additions in the first quarter includes 27 promotions and 10 net terminations. Annualized fee revenue production…

Thanks, Gregg. As I said earlier, new orders remained seasonally strong in the first quarter with a little bit -- a little more consistency in the month-to-month trends. As is usually the case, July new orders were lower than May and June. And August new business also decelerated, but primarily due to seasonality. But, for example, in our Executive Search, it was still 6% to 7% greater than what we saw last year in the month of August. And looking ahead to the second quarter of fiscal '14, we expect new orders towards the end of the quarter to rebound back to a pace and trajectory similar to that of the beginning of the first quarter. Assuming worldwide economic conditions, financial markets, foreign exchange rates remain steady, fiscal '14 second quarter fee revenue is likely to range from $225 million to $237 million and diluted earnings per share are likely to range from $0.32 to $0.38. With that, I'll conclude our prepared remarks and we will be glad to take any questions you may have.

[Operator Instructions] And our first question will come from Kevin McVeigh with Macquarie.

I wonder, Gary, it sounds like the LTC business is really contributing a nice percentage of the revenue now. As we think about that sustainable kind of adjusted EBITDA target of 16% to 18%, how are we thinking about kind of the different components and how would they contribute to that in terms of the Search versus LTC?

Well, we're very pleased that the non-Search business has been very persistent [ph], and we -- the Futurestep business is going to have lower margins, for sure, but that's going to be a component of how much RPO activity we have. So as an organization, we are targeting 15% to 18%, and we would expect our LTC business to contribute those kinds of margins. The Search would be maybe a little bit more and Futurestep would be a little bit less.

Got it. And as you think about LTC at 40%, does that continue to climb here? Or -- and just on the back of that, it sounds like you're, if I heard it right, pushing kind of out that initiative across all your consultants. Are going to kind of tweak the compensation structure as a result to that at all?

Well, we've continued, over time, to evolve our compensation structure and we will continue to do that. But today, it's all about being relevant and differentiating yourself and fighting for growth. And so, although, compensation is important, it's not #1. And we have to be more relevant to our clients. And we think by going to market is one. Bringing a richer, deeper set of offerings, we will, indeed, drive the top line, and our employees and colleagues will be further differentiated. And just as a point of clarification, the 40%, it not only includes the LTC business, but includes the Futurestep business as well. LTC is about 26% of the top line, Futurestep's 14%.

Got it. And then one last question, if I may, margins overall, it's a real nice expansion, particularly in Europe and Asia Pacific. Any thoughts on -- is that just kind of in better revenue trends, cost actions or, really, what drove that outperformance?

It's both. We've seen a nice broad-based uptick in activity. And, secondly, I think that we have really taken the right balance on the seesaw between investment and growth. And we've -- I think, we've actively managed the business over the past few quarters, and I think it's showing.

Our next question in queue will come from the line of Tobey Sommer with SunTrust.

Gary, over the last year or so, you've deployed some capital, expanded and diversified the business and the cash balance is getting closer to -- back to the prior level. How do you feel, in terms of deploying more capital, to kind of further provide separation between yourselves and the rest of the market versus other alternatives at your disposal?

That's a great observation. Our first priority would always be to invest and grow. And that we really think that there's a multi-hundred million dollar opportunity for us here, incrementally, from where we are today, and we see ourselves as a couple billion-dollar company. And we also believe we need to continue to arm our organization with deeper, richer offerings. We think we have a good opportunity on the product side to grow that business through intellectual property and technology. Having said that, we are -- we're not necessarily proud with our return on capital this quarter, which is kind of 7.5%. We're very, very mindful of that as a leadership team. And so, I'm not going to comment other than I certainly recognize the question, our board recognizes the question, and our priority would be to first deploy it in the business. But we're very, very mindful of the alternatives with that capital.

And your headcount was up sequentially in the quarter but, I guess, primarily as a result of promotions. What do you think you'd do with it throughout the fiscal year? And I asked that because the tone of the way demand was characterized in the prepared remarks of various people seemed to demonstrate some improvement. And I just wonder if you're confident enough in that trend to plan on adding to meet that demand?

Well, we -- again, look, Tobey, we continually are looking to promote from within, first and foremost, within the organization. And also to add talent from the outside, like our clients do. So we're not going to change our modus operandi. And we're going to continue to be aggressive in trying to bring people that not only can drive the top line but they can drive change that can be forward leaning and that can help us continue to move our culture.

Just one quick numerical question and one after that as well. If you gave the spendable cash balance, I didn't catch it, so if I can get that. And then, Gary, could you talk a little bit more and expand about upon what your plans are and the opportunity to capitalize on the IP resident within the firm and monetize that through perhaps kind of more lucrative channels?

I'll comment on that, and then, Bob, you can...

I'll pick up the...

Yes. As a CEO in just about any company or any industry, any business, there is an incredible fight for growth right now, and at the same time, you're asking more from less people. So with that as a backdrop and this fight for growth, organizations spend anywhere from $400 to $1,000 per employee on development, and on motivation and stimulation. And so we think that there is an opportunity to license our intellectual property to help that CEO, to help him or her drive that growth, create that excitement, create that motivation. And so today, we've got what we would characterize as a $50 million, essentially $50 million, products business, either paper-based or software-based, where companies use our intellectual property to engage a workforce, develop a workforce, stimulate a workforce. And so we are thinking up in ways in which we can take that intellectual property and capture some of that spend of, say, $500 or $1,000 per seat around development. So one of the things, as an example, is around this concept of learning agility, which we think, in the environment today, is critical, this kind of borderless growth. And so, we are developing product that can be licensed for companies to use with kind of knowledge transfer that doesn't require an army of consultants to really stimulate and motivate a workforce.

And then, Tobey, this is Bob. On the cash, I'll just run through the numbers quickly with you. So our total cash and marketable securities position at the end of the quarter is $280 million. And when you back out amounts for deferred comp and bonus, that goes down to about $132 million. And when you adjust that down further for our global working capital needs, that's about -- we're left about $32 million.

Our next question in queue, that will come from the line of Tim McHugh with William Blair & Company. Timothy McHugh - William Blair & Company L.L.C., Research Division: I guess, just at a high level in the Executive Search business, can you characterize to us how it feels different than a year ago, when there's kind of downward pressure on you and others in the industry? It clearly seems to have improved, but if there's 1 or 2 factors that you would point to, what would they be?

Well, I think, number one, we're 1 year further out from the great train wreck, so we're now 4 years into a cycle versus 3 years. I think that people are becoming very, very accustomed to the new normal. So I think that there's a sense of more normalcy for our clients. The second thing is that financial services, as you very well know, Tim, was very, very challenged. Going back several years, it historically represented 22% of this company. Today, on a consolidated basis, it's 15%. So it's still off where it was. And so, you're seeing again more normalcy there, more people accustomed to the re-regulation, a shift from investment banking to commercial banking, asset management, wealth management, we're adjusting to that trend. And the third area is life sciences and healthcare, and that continues, even from a year ago, to be a very, very buoyant market across -- whether it's pharma or biotech. So those are the headlines. Our average search fee over a year is probably up just slightly, I guess. It just held its own and it's up a little bit. That's probably what I would characterize as the big-ticket item.

Yes. And I would just interject, Tim, a little bit. If you go back, because we looked at our new business activity over the past 12 months and 0it's like January 1 hit and there was a step change in the level of new business activity. We saw almost an average of 10% consistent growth from the second half of that 12-month period versus the first half. Timothy McHugh - William Blair & Company L.L.C., Research Division: The numbers in Europe and Asia seem a lot better, just, at least, on a year-over-year basis. Does that environment feel sustainably different? And is that macro related or more individual or company-specific?

Well, it'd probably be unfair to say just company specific. Yes, it’s both, but, when you -- if you were to talk to 2 of our great leaders in both those businesses and you ask them the difference, there'd be 3 words. And that would be, our-integrated-offering. So our differentiated platform, I think, is making a huge difference in Europe and Asia. But look, it's clearly both. It's a more stable environment, but it's also the offerings that we're putting together here. Timothy McHugh - William Blair & Company L.L.C., Research Division: And then on the leadership and talent side, the organic growth looked good but the revenue run rate that, coming out of PDI and Global, remained a little lower, I guess, than the historical. How do you -- you talked about organic -- or kind of, I guess, new business trends improving, how do you feel about the underlying organic growth potential as, in a couple of quarters, they'll get dropped then to that calculation, at least?

Yes, well, we -- there was organic growth year-over-year in that business. I think that 248 days into this, we have done an awful lot, in terms of bringing together, essentially, 2 equal-sized organizations. We've co-located or relocated a large percentage of our workforce. We've done some things around technology, intellectual property and culture. And we had a very planned approach that we would focus on those areas, as well as profitability. So, for example, for the PDI investment, when we made the acquisition, we said that we would pick up somewhere between $86 million and $96 million of revenue, it was running at a 8% margin. We want to add 10 percentage points to that. And I think we've essentially delivered on that. But our expectation, and it may not be in this next quarter, or the quarter after, but our expectation is that the growth rate on this business better be well north of 10%. That's our own expectation. So it's -- I think we're very pleased with where we are, but we're certainly not where we want to be.

Yes. And Tim, I would just add a couple of thoughts. And that one is, as you look at those businesses, it's really -- it's almost impossible today to continue to pick them apart and focus solely on PDI or Global Novations as we continue with the integration of our products and offerings and so on. Coming out with a more common uniform set of assessments and competencies and so on. I think, second, if you look at the new business, in both of PDI and Global Novations, you really start to see us exiting the quarter with some real momentum. And just to give you one point of fact. In Global Novations, for example, if you go back and look at where they were in the fourth quarter of last year, and there was their backlog relative to where they are today, it's up 2x. So we're starting to see some of the top line momentum as we exit the quarter. Timothy McHugh - William Blair & Company L.L.C., Research Division: And is there's still a deferred revenue impact weighing on in terms of write-off, of deferred revenue, and I guess, weighing on?

Yes, there is. And that's more relative to PDI than to Global Novations. Global Novations has a small amount of deferred license fees when we bought them, but PDI was up in the -- somewhere between $4 million and $5 million of deferred fees that we just -- we're not getting the benefit of, as we go into this year so... Timothy McHugh - William Blair & Company L.L.C., Research Division: That was the aggregate, right? Or was that impact just in Q1?

No, that was the aggregate. So that we'll lap that January 1 of next year. Timothy McHugh - William Blair & Company L.L.C., Research Division: Okay. And then, just one quick numbers question. The tax rate, it was a little higher than I expected. I guess, kind of at least what are you assuming for 2Q kind of going forward?

Yes. We've got this phenomenon with way that GAAP makes you do your interim tax rates that you'll end up, our rate is not going to change on a full year basis. But what ends up happening, because of the mechanics of the interim provision calculation, you end up with a little bit higher Q1 and Q2 and that reverses Q3, Q4. So I would say Q2, I'd hold pretty consistent with where we are now and then we'll see that come down Q3, before -- if you go back and look at FY '14, or I'm sorry, FY '13, you'll see probably a very similar pattern. Timothy McHugh - William Blair & Company L.L.C., Research Division: So it's a 35% for the full year still?

Yes, I think 35% for the full year is probably a good number.

Our next question in queue, that will come from the line of art Mark Marcon with R. W. Baird. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Can you talk a little bit more about LTC with regards to -- what is -- what you've learned over these 200 days, that those organizations have been put in place? What's a little bit -- what are the areas that are -- where you're finding the highest level of success? And as we think about that growth rate on an organic basis being north of 10%, how should we think about the incremental margins? In other words, what's the pace of getting to the targeted operating margin for that particular business?

Well, I think that, in terms of what we've learned, you don't know what you don't know. I think that, in so many of these acquisitions, what you find is you focus on strategy and numbers, but the ultimate trump card is people and culture. So I think that what we have learned is that the -- one of our reads, relative to the culture of, for example, Global Novations, or PDI, was that they were meritocracies, and it's turned out that we were right. But the amount of -- when you do an acquisition, the amount of uncertainty and questions are certainly pretty high. But we've also learned that when we really combine the firm as one, and not Search or Futurestep or LTC, but rather, when we go as one, and what, for example, Bernard is leading in Europe, we're having enormous success. So I think that is the big learning. Is that the brand has incredible permission. There is a real pull factor there and that, as an organization, we must go to market as one. So that's one learning that we have to continue to push forward. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: And then, as we think about the -- hitting the targeted level in terms of the margins, how should we think about that in terms of that?

I would think, Mark, that we'll, over the next couple of quarters, we should be relatively consistent with where we are now. As we've said, we've got some investing to do in our technology platform before we can fully realize all of the benefits. And as we've looked at the cut over time frame on that technology, given our Sarbanes-Oxley requirements and so on, that will probably be a May 1 cut over. So we would expect to hit our full stride probably starting next year. But like I said before, we're pretty proud of the progress we've made so far this year. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Yes, I mean, it's been nicely consistent since the first quarter where it was fully integrated. And you mentioned the utilization rate, where would you expect that to go to?

Better be higher. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: I sense that.

I think, our target for them is about 70%. So it just is...

In the near term.

Yes, in the very near term. It's the summer time now, with vacations on our side, our clients' side and so on. And so, we saw a little bit of a dip there from -- we were running at about 67%, but we'd like to see that at closer to 70% very near term. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: And can you talk a little bit about both EMEA and Asia Pac, just in terms of the increase in the margins. You did mention that there was some reduction in cost. And obviously, the revenue ended up increasing. But was there anything else that contributed to the significant jumps in the margins on both sides?

Mark, again, if you would ask our leaders of those businesses, they both, independently, consistently, would tell you that it's the integrated offering and the value proposition. So I think that, that is certainly part of it. We've seen, we think, in Europe, I'm incredibly proud of the organization there. We saw, despite all the questions about Europe, just sequentially, we saw improvement in France, Germany, Switzerland, our business is incredible, and in the U.K. And in Asia, Australia was very, very solid. China was solid and Singapore was very good in the quarter. And so, some of that has been helped by a more normal financial services environment, for sure. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: So it sounds like the margins, in terms of where they currently are within your international search operations, should be sustainable?

At these revenue levels, we would think so. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Great. And then can you talk -- last question and then I'll jump off, can you talk a little bit about -- we always talked about the value add that comes from the core executive search. And obviously, the finding part has changed, as you've described. Do you think plans have kind of -- and I'm talking about in North America, have kind of normalized in terms of, here's what -- where we feel like we need somebody from the outside and here's where we think we can do as good a job inside. Do you...

I think so. I think that there was also, coming out of -- early into this recovery, a heavy focus on outsourcing, outsourcing all sorts of functions. I think that, that has normalized. And right now, there's just an incredible, incredible fight for growth for -- with our clients.

We do have a follow-up question in queue, that will come from Tobey Sommer.

My question's been answered.

It appears that there's no further questions in queue, Mr. Burnison.

Okay. Well, I want to thank our shareholders and we are very, very proud of where we are today, but we're not where we want to be. And just like our clients, we got to be limber and agile and driven to act always, all the time. And thank you for your time this afternoon and we look forward to speaking with you again. Thank you.

Thank you. And ladies and gentlemen, this conference will be available for replay for 1 week starting today at 7 p.m. Eastern Daylight Time, running through the day, September 12, at midnight. You may access the AT&T Executive Playback service by dialing (800) 475-6701 and entering the access code of 302040. International participants may dial (320) 365-3844. Additionally, the replay will be available for playback at the company's website, www.kornferry.com, in the Investor Relations section. That does conclude your conference call for today. We do thank you for your participation and for using AT&T Executive TeleConference. You may now disconnect.