Korn Ferry International Q1 2005 Earnings Conference Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Randy Mehl - Robert W. Baird - Analyst : Good morning and congratulations on great results here. I wanted to pursue the productivity in the quarter. You mentioned annualized about 950,000. Is this where you would expect to see it top out, or do you think there's some upside to the productivity number?

Question: Randy Mehl - Robert W. Baird - Analyst : So you're still -- still think that at this point 1.1 to 1.2 million is realistic. And then in terms of the guidance for next quarter, I think your assignments last year in the second quarter were up about 30% sequentially. Is this something that we could see again or maybe you could explain why we saw it last year and wouldn't expect to see it this year?

Question: Randy Mehl - Robert W. Baird - Analyst : One last question about Europe since you brought it up. Obviously, the first quarter has the potential to be seasonally weak there. Your results were outstanding in Europe. I'm just wondering if there were some particular items or sources of strength that were more one-time in nature, or if this is just part of what you're seeing as better execution in maybe a mildly improving environment?

Question: Randy Mehl - Robert W. Baird - Analyst : Thank you very much. I appreciate it. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Mark Marcon - Wachovia Securities - Analyst : Good morning and congratulations on the terrific results. Wondering, with regards to the -- you've had nice margin improvement both in Europe and Futurestep, and I'm wondering how much higher can the margins go in Europe and Futurestep?

Question: Mark Marcon - Wachovia Securities - Analyst : Terrific. And you've made a number of hires after the quarter ended. Where are you in terms of the total number of consultants right now?

Question: Mark Marcon - Wachovia Securities - Analyst : At this point, as opposed to quarter end?

Question: Mark Marcon - Wachovia Securities - Analyst : Okay. And is it your sense that the new hires who seem like they're -- have fairly impressive resumes coming in, do you think that they could be at the -- fully productive in the first couple of quarters that they are in place, or is there going to be a lag?

Question: Mark Marcon - Wachovia Securities - Analyst : Obviously there's some seasonality involved coming up into this quarter, but would you expect to see the same sort of year over year gains in terms of productivity that you've been seeing?

Question: Mark Marcon - Wachovia Securities - Analyst : Okay. And did you see any sort of fall off in activity in July, besides the normal seasonality, just given what happened with -- for the stock market as well as oil prices and some --

Question: Mark Marcon - Wachovia Securities - Analyst : Great. And lastly, what sort of tax rate are you assuming in your guidance?

Question: Mark Marcon - Wachovia Securities - Analyst : 36. Is that what it's going to be for the year, Gary?

Question: Mark Marcon - Wachovia Securities - Analyst : Is that what it's going to be for the year?

Question: Mark Marcon - Wachovia Securities - Analyst : Okay, great. I'll jump back on later. Thanks.

Question: Ty Govatos - CL King - Analyst : Let me add my congratulations. Terrific quarter. Could you tell us what the bonus accrual for the quarter was and give us some indication at the rate you're reserving for the year?

Question: Ty Govatos - CL King - Analyst : How about if I ask you as a percentage of net or gross revenues, would it continue to run at the same rate as the 18 million?

Question: Ty Govatos - CL King - Analyst : Okay. One other question. You implied that you're going to beef up your technology system. Will that entail noticeable cost? And if so could you elaborate?

Question: Ty Govatos - CL King - Analyst : Okay. Thanks an awful lot. Again, great quarter.

Question: Toby Sommer - SunTrust Robinson Humphrey - Analyst : Thank you. Good morning. I had a couple questions. Wondered if you could delve a little bit deeper into the market share gain you described in Germany, I think it was. What are the drivers as you see them for your potential market share gains going forward? And then I was also curious about what you think, how you think you're going to deploy your cash as the market is still building here? Thanks.

Question: Toby Sommer - SunTrust Robinson Humphrey - Analyst : There was. I was interested in how you think you're going to deploy cash over the coming quarters. You did -- you do have a substantial cash balance. I'm curious what you may, your thoughts are in that regard.

Question: Toby Sommer - SunTrust Robinson Humphrey - Analyst : And in the terms of your expectations for additions of recruiters in coming quarters, is this sort of a case that we should think

Question: Toby Sommer - SunTrust Robinson Humphrey - Analyst : One last question. I was curious where you think gross margin will end the year .

Question: Toby Sommer - SunTrust Robinson Humphrey - Analyst : Revenue, I'm thinking sort of less the compensation and benefits? I guess that's the way we have it worked out in our model.

Question: Toby Sommer - SunTrust Robinson Humphrey - Analyst : Thank you very much.

Question: Andrew Fones - UBS Warburg - Analyst : Hi, guys, this is Andrew Fones for Kelly. I was wondering if you could give us perhaps a specific target in terms of the number of recruiters that you might have at the end of this fiscal year?

Question: Andrew Fones - UBS Warburg - Analyst : Okay. And you mentioned you primarily have two types of recruits, new recruits. Could you kind of give us a sense of what you're targeting at the moment, and perhaps kind of what the mix is, or perhaps the target mix in terms of kind of experience of recruits, as versus kind of people new to the recruiting industry?

Question: Andrew Fones - UBS Warburg - Analyst : Okay. Thanks. And could you give us a sense of the number of new recruits that -- going perhaps into the new Leadership Development practice and perhaps you could give us a sense of how that practice is building out, and I'm not sure if you've given any kind of quantification before, but perhaps if you could give us a sense of the size of that practice now as a percent of your revenue?

Question: Mark Marcon - Wachovia Securities - Analyst : Paul, your fees per assignment increased by about 5%. As color as to what drove that and whether we should continue to expect that to occur?

Question: Mark Marcon - Wachovia Securities - Analyst : So it's actually your fee is a percentage of the cash -- first year cash comp that's going up a little bit or is it more the cash comp for the actual recruited position is going up? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Mark Marcon - Wachovia Securities - Analyst : Terrific. In terms of the -- in terms of Futurestep, this is the first time we're actually seeing a bit of a pick up with Futurestep going into what is traditionally a weaker seasonal quarter for you. I'm wondering if you could give us a little bit of color what to expect this coming quarter out of Futurestep? Are you going to see the same sort of seasonal dynamics that you would on the traditional search side, or is that going to be a little bit different and what would the implications be for margins there?

Question: Mark Marcon - Wachovia Securities - Analyst : Great. So, still have some upside that we probably won't see it this quarter?

Question: Mark Marcon - Wachovia Securities - Analyst : In terms of your account strategy, any comment in terms of market share gains among your top 20 or so accounts across the globe, any color that you can give us there? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Mark Marcon - Wachovia Securities - Analyst : As I understood you're not giving any color with regards to the size of is the Leadership services. Is that correct?

Question: Mark Marcon - Wachovia Securities - Analyst : Okay. And how much did you pay out in bonuses this last quarter, was it around 36 million or so?

Question: Mark Marcon - Wachovia Securities - Analyst : So we have something like 6 to 7 million to go?

Question: Mark Marcon - Wachovia Securities - Analyst : Okay. Great. And Capex, where would you expect that to be for the year? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Mark Marcon - Wachovia Securities - Analyst : Okay. And then there was some mention about an increase in bad debt expense, can you give us any color there?

Question: Mark Marcon - Wachovia Securities - Analyst : So, you kept the percentage basically flat?

Question: Mark Marcon - Wachovia Securities - Analyst : Okay. Great. Terrific. Thank you very much.

Question: Toby Sommer - SunTrust Robinson Humphrey - Analyst : Just curious, you talked about the decision making processes of your customers that some of them have more, perhaps oversight or input from corporate versus some more decentralized. Is there any way that we should look at your customers in terms of perhaps you being in a more competitive position if you deal with people who are more centralized, because you do have a global platform with multiple products, or do you see that as not a factor? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Toby Sommer - SunTrust Robinson Humphrey - Analyst : Thank you very much.

Question: Ty Govatos - CL King - Analyst : Hello, again. Technical question on your direct cost. If I exclude the bonus accruals, last year that item was running at roughly 42, 43 million a quarter. It had a big jump in the fourth quarter to 49. I guess because of some one-time payments, et cetera. I would have expected that to decline substantially in the first quarter and it was still around 47 million. Could you explain why that's still up at that level? Is that from the new hires base salaries, et cetera?

Question: Ty Govatos - CL King - Analyst : Okay. Thanks again. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Mark Marcon - Wachovia Securities - Analyst : Hi. Just one last follow-up. In terms of the corporate overhead, is that -- should we take a look at the level of this quarter and basically use that as a good level for the balance of the year?

Question: Mark Marcon - Wachovia Securities - Analyst : Great. Thank you.