Q3 2020 Heidrick & Struggles International Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Heidrick <unk> struggles Q3 2020 earnings conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session basket.
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I would now like to hand, the conference over to your speaker today.
Sure, Dan Rosenberg, Vice President Vice President of Investor Relations.
Yes. Thank you.
Good afternoon, everyone and thank you for participating in Heidrick <unk> struggles 2023rd quarter Conference call. Joining me on today's call is our president and CEO Krishnan, Rajagopalan and Chief Financial Officer, Mark Harris we.
We've posted our third quarter slides on the IR home page of our website at Heidrick Dot Com and we encourage you to view them for additional context, but we won't be referring to a specific page numbers during our opening comments.
In our materials, we refer to non-GAAP financial measures that we believe provide additional insight into our underlying results.
A reconciliation between GAAP and non-GAAP financial measures can be found in the last schedule of the release also in our remarks, we will be making forward looking statements and I ask that you. Please refer to the safe Harbor language contained in our news release with that Christian I'll now turn the call over to you.
Dan Thank you.
Good afternoon, everyone and thank you for taking the time to join our call.
Hi, good continues to rise to the occasion and meet the unprecedented challenges of 2021.
We're advising our clients in new and different ways and supporting our colleagues in communities, where we live and work.
Amidst this we posted quarterly results that exceeded our expectations and we remain focused on gaining market share in what continues to be a dynamic environment.
Stronger business trends are beginning to come into focus and we have the financial strength to continue to make strategic investments, which will position us for long term growth.
Let me briefly touch on our third quarter results, which Mark will go into further detail shortly.
Net revenue was 143.5 million, which represents a sequential decline of a little more than 1%.
Significantly better than what we anticipated in our last call with you.
This translated into an adjusted operating margin of 6.9%, which was up 70 basis points for the second quarter.
On an adjusted EBITDA margin of 11% or 250 basis point increase from the prior quarter.
These results are adjusted for the restructuring charge.
As you know in the beginning of the third quarter, we implemented a restructuring plan to optimize future growth and profitability.
Following these actions we are confident that we have right sized the business for anticipated demand.
Even as business improves and we invest appropriately to meet increased demand, we see permanent cost savings and efficiencies.
For example, we see opportunities to further optimize our global real estate footprint as we change the way we work and.
And Mark will speak more specifically about this later on the call.
The key takeaway here is that as.
As we eventually emerge from this pandemic, we will be in an even stronger position to navigate through future market uncertainties, while having improved our growth potential and expanded our future opportunities.
We're especially encouraged by the trend we are seeing in demand for our services.
During the quarter, we saw confirmations improved from June to July.
August confirmations were lower as is typical for that time of year and then we saw a rebound in September which.
Which has continued into October.
Well economic uncertainty continues across the markets. We serve we are seeing continued geographic recovery in Asia Pacific markets, such as China.
Singapore.
India and Korea.
In Europe, we're seeing some improvements in the UK.
Germany, Denmark.
In Switzerland, and in the Americas confirmations are showing signs of improvement from Q2.
With these vary by industry in country.
We remain focused on working at the top of organizations and our team has been creative and proactive in finding new ways to convene with our clients in this virtual world as we continue to build momentum and emerge from this crisis as an even stronger firm.
Importantly, client feedback has been extremely positive and our team of people around the world is staying resilient in connected through collaborative projects and large scale engagements across search and consulting.
In terms of key trends across our business our clients continue to embrace the digital delivery of our services and we're seeing increased demand across a wide range of areas, including healthcare and life sciences, especially from innovative biotech companies.
Health care technology.
And health care provider segment.
In diversity and inclusion or deny where there is a heightened focus on creating inclusive workplace cultures across the U.S. and globally.
An increasing number of our clients are using our leadership assessments to help them identify.
And measure agility and leaders.
And there is a growing focus on leading high performance teams.
Particularly more virtual and distributed working world.
Let me give you a few recent examples of some interesting client work we have embarked on.
On the virtual delivery of our integrated services on a global scale.
This quarter, we work for the global real estate investment firm and virtually convened a global team of nearly 100 consultants to liver twod to deliver 100, plus assessments, including organizational design and restructuring and have launched numerous search engagement as a part of that effort.
On the topic of DNA <unk>.
Linking culture and inclusion to business performance.
We began advising a leading beverage company on linking their workplace culture to performance using RBC methodology, which focuses on accelerating deny impact on results by building visible representation incur.
In creating increased inclusive cultures.
And on measuring agility for one of our global logistic services clients, who are using our proprietary framework and tools to assess high potential leaders and their capabilities, including their ability to lead with agility.
As we enter fall.
We continue to see very encouraged scenarios around the world with some countries stabilizing and others experiencing a surge or preparing for another potential wave.
While we see signs that the markets. We serve are on the road to recovery.
We know there is still a long way to go.
Nevertheless, our team continues to perform well and we believe we are gaining share in the market.
What also stands out is that we're continuing to transform our business and in some cases, the pandemic is accelerating our transformation.
In Heidrick consulting all of our primary offerings can now be delivered virtually despite the unprecedented nature of 2020.
Year to date were only 4% below the year ago period.
Search continues to deliver 100% of engagements on heidrick connect and we're increasing client adoption of our infinity framework.
We have made significant enhancements to our CRM platform that we use in search and consulting.
Our product development team is developing and delivering differentiated data rich and digitally enabled services.
We launched our integrated DNA offering this year and our pipeline is very strong as we expand this offering globally.
At the same time, we continue to implement our DNA work internally.
We are exploring innovative I T solutions for working remotely and be even more effectively and efficiently.
And as Mark will discuss.
I'm also very excited about how we are transforming our real estate strategy.
These are just some of the capabilities and new offerings that are driving our performance and transformation as we continue to win market share.
Moving forward, we remain committed to going to market as one firm with an integrated value proposition.
We're also focused on advancing important long term initiatives that we expect will broaden our capabilities and service offerings.
Leverage our core brand and position our firm for longer term growth in 2021 and beyond.
I'd like to reiterate how proud I am of our global team of employees.
This month, our employees recently participated in our second global day of service.
Honoring our commitment to give back to the communities, where we live and work.
In light of the hardships and events. So many around the world continue to face in 2020.
It is more important than ever that we continue to come together and find ways to get back.
I want to thank all of our employees not only for their time and commitment to this important initiative, but also for their hard work and contributions.
Each and every day towards advancing our clients' agendas.
Thanks for joining us now.
Now, let me turn the call over to Mark to elaborate on the quarter.
Thank you Chris Ana Good afternoon, everyone. Thank you for joining our call today.
Let me start off by congratulating our teams here at Heidrick for the incredibly strong performance in the face a very turbulent market conditions.
I commented on our last call that I was expecting to see our revenue slipped 10% to 15% from the second quarter of 2020, but due to the hard work of our team we were only down approximately 1%.
This performance contributed to our balance sheet strength demonstrated by our liquidity being over $400 million.
These continue to foster access to liquidity, which remains strong and accelerating in the capital markets as we continue to see opportunities to further enhance our competitive position.
For purposes of the call today I'm going to focus more on the sequential trends as I believe these are more meaningful than the previous year's performance. Given one is pre pandemic and one is during the pandemic, which is really the driver for most of the variances between those periods.
We recorded nearly flat third quarter net revenue of $143.5 million when compared to $145.6 million in the second quarter of 2020.
This was better than we publicly commented on our last call and coupled with the demand momentum we have been seeing thus far in October is pointing to continued market strength for the last quarter of 2020.
Now, let me turn to some of the drivers behind the relatively strong performance.
Executive search net revenue was $129.2 million down 4% sequentially.
Looking at our regional performance sequentially, we saw Americas Executive search revenue was down 6% Europe executive search revenue down, 4%, but Asia Pacific Executive search revenue increasing 6%.
The better than expected strength across each region was driven by both the higher number of engagements we closed on in the period and the value of these searches.
We continue to see resilience with our clients, which has been encouraging and appears to be continuing into the fourth quarter.
I'd or consulting also showed great resilience in the wake of depend on it in fact, while executive search revenue was down marginally higher consulting revenue was up 25% to $14.3 million compared to $11.4 million in the second quarter of 2020.
In addition year to date.
Our consulting revenue was only 4% behind the same period last year.
This performance was also higher than we anticipated driven by increase in demand for talent assessments and adoption and acceptance of our digital delivery services across multiple leadership advisory solutions, resulting in a larger client engagements.
On the cost side, we saw salary and benefits declined 1% from the second quarter of 2020.
Variable compensation increased 2.5 million sequentially due to higher consulting outperformance, but fixed compensation decreased 3.2 million sequentially, primarily due to paid time off by employees reduction in base salaries and related payroll taxes around our workforce restructuring and our deferred compensation plan.
General and administrative expenses decreased $2.2 million or 7% sequentially to $29.8 million or 20.7% as a percentage of revenue compared to 22% as a percentage of revenue in the second quarter of 2020.
There were savings achieved in several areas, but the biggest improvement was an office operational costs and travel and entertainment partially off offset by increases in professional fees.
Moving forward, we expect continue savings and Shannay as more of our team will continue to work from home and from the implementation of our new real estate strategy, which I will discuss now.
This aligns with our long term goal to drive DNA to blow 18% of our revenue more consistently.
As discussed on our last conference call during the third quarter, we implemented a restructuring plan to optimize future growth and improved profitability.
We recorded a restructuring charge of $48.1 million with approximately $14 million pertaining to our new real estate strategy, which will have an annual cost savings of approximately $6 million 50.
$15 million pertaining to our workforce reduction, which will have an annual cost savings of approximately $30 million per year and $19 million pertaining to the elimination of certain programs and benefits, which will have similar savings through the next three years with no cash impact.
Our real estate strategy consists of the following three priorities.
First matched the footprint to the new expected normal which in many cases reduces our footprint by 50%.
Second create an open and collaborative environment, including unassigned workspace and facilitate work from anywhere.
Third increase our focus on reducing our carbon footprint as part of our long term sustainability goals.
We continue with our real estate as we can tell you is our real estate strategy. We expect there will be more restructuring charges pertaining to our leases in the range of $10 million to $15 million.
We will provide more details during our next call, but we have expectations that these will drive an additional $5 million to $8 million year savings.
Removing the impact of restructuring adjusted operating income in the third quarter was $9.9 million up from $9 million in the second quarter 2020, an increase of 10%.
Adjusted operating margin was 6.9% up from 6.2% sequentially, which we were very pleased with that.
This corresponded to adjusted EBITDA of $15.8 million and adjusted EBITDA margin of 11%, which was up 250 basis points sequentially from the second quarter and marked strong performance given the pandemic related headwinds.
Our adjusted net income in the third quarter was $7.7 million up from $7.2 million sequentially and our adjusted diluted earnings per share was 39 cents up from 37 cents sequentially more than covering our dividend.
Before turning to our balance sheet, let me add some color in terms of our tax rate given the complexities around goodwill and restructuring deductibility.
Our tax rate in Q3, 2020 was 33.3% before restructuring charges, which is a more normalized rate for the quarter for your benefit our Q2 2020 effective tax rate was 38.3% before goodwill.
And this puts our year to date effective tax rate at 37.3% on a normalized basis.
We have seen some information in the public markets, but our tax rate post implementation of the proposed Biden tax proposal.
To help everyone understand this impact if we look at our historical 2019 performance for our effective tax rate was 32.4% under the Biden tax proposal. This would have been 39.4% an increase of 7%.
This assumes that we do not take any tax planning into consideration, which will certainly always do.
Now I will turn to the balance sheet.
At the end of the third quarter, our cash and marketable securities continued to strengthen as we saw second sequential increase of $49.8 million to $237.6 million adjusted for the credit facility outstanding at the end of the second quarter.
As you can see we repaid our outstanding balance of $100 million in our credit facility in early September resulting in no borrowings at quarter end.
In terms of overall liquidity Im very pleased to report that we finished the quarter with $410 million compared to $360 million at the end of the second quarter of 2020, which demonstrates the outstanding balance sheet strength and positions heidrick incredibly well to explore opportunities in search consulting and potentially new areas outside of core services.
That are aligned with our premiere of human capital services strategy.
Now, let me turn to the fourth quarter given the consistent performance. We are seeing in our markets. We believe our fourth quarter revenue will be in the range of $140 million to $150 million of.
Of course, this can change materially if we see another slicing COVID-19 within the countries. We operate the government's choose to restrict business or access our government's not take necessary steps in stimulus as well as other macro events and acute business events that are unforeseen at this time.
In summary, our third quarter performance continues to reflect the impact of the pandemic, but clearly demonstrate our resilience in difficult markets by our team. We remain focused on strong execution long term planning and adding value to our clients.
With that we'd be glad to take your questions operator over to you.
Thank you that's it.
A reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key please stand by while we compile the culinary roster.
Your first question comes from the line of Josh Vogel with Sidoti and company. Your line is open.
Thank you.
Good afternoon, guys. Thanks for taking my questions.
First question a question you mentioned that all the offerings that.
Consulting are being delivered digitally today I'm curious if you have any thoughts about what percent of that business could be delivered that way longer term.
Yes look it's not going to be.
100%.
Thank goodness.
There is still some gatherings and things that we do.
Convening that's required.
And we will continue to be required but.
We expect that.
Well in excess of if we really started off with.
Pre cove it at almost.
Zero for consulting.
I suspect that we'll be somewhere between 50 and 60% and.
And the rest of it is still going to be.
Delivered.
In person.
So that I think some number like that sounds reasonable to me.
Okay, great and.
The number of executive search consultants.
We're down about a third plus sequentially and I was curious if that was a function of the restructuring activities or natural attrition.
Yes that was the restructuring activities I believe.
Okay and can you can you remind me what consultant attrition looked like in the prior two cycles or downturns and maybe how that compares to today and what you're specifically doing in recent months to retain your top talent.
Yes.
Im not I mean, if I go back to the previous cycle than you and me.
I mean.
And when you think about attrition I mean.
I think you're talking about it outside of restructurings that kind of what you mean by that and outside of the economic impact yet. So I think that in general it's really quite low for us right now.
It's going to be in the low single digits for us.
At this point in time and.
And what we're doing to maintain that is just I mean, it's all the connectivity inside the firm.
Yes, everything that we do with how we treat each other how we deal with each other all the zune calls all the practice calls we continue to provide development programs for everybody.
Virtually.
We're committed to promoting.
So.
We've got a promotion cycle is going so we're doing all of those things, which I think help us create.
Create vet.
Very strong culture, we collaborate.
On so many projects across not only search.
Search in consulting so I think there's a very strong culture and fabric that we've built here.
Great and just two quick ones for Mark maybe.
The restructuring charges that you mentioned that 10 to 15 million tied to real estate is that all expected to be taken in Q4.
No I think well.
The goal there is probably really Q4 and potentially.
Very early part of next year a lot of it is really more about when we can strike agreements either with our current landlords or with new landlords.
So okay I'll say.
Okay, Great and just lastly.
If biden takes office and the tax proposal passes mentioned that 2019 would have been 7% higher but that didn't.
Take into account any tax planning on your end so.
Do you think that.
Longer term, we should expect a high 30% tax rate. If he takes office in that passes or or do you think you can get it down into the mid Thirtys I know, it's a tough question about just curious your general thoughts there.
Yes, My general thoughts are I don't think there's anything real let low hanging fruit from a structural point of view will impact us right away. So I think the first year will be that.
Kind of pre planning so to speak and then we'd really start to look at potential structures.
To try to obviously be as effective as we can with our tax rate. So.
Usually happens that way Josh the first years kind of that bump and then the next years again, assuming that there's no efficiencies that can be built and then they will be built in.
Alright, great. Thanks for taking my questions guys.
Sure. Thank you.
Again, if you would like to ask a question press star one on your telephone.
Your next question comes from the line of token someone with true your line is open.
Thank you.
If you could comment on what your appetite is to.
Ploy capital.
On acquisitions in areas that you might be interested.
If you could could you refresh us on what.
Spendable cash looks like if we kind.
Strip out your accrued bonus and other.
Kind of.
Items that you would consider.
No certainly spendable at this moment thank you.
Sure.
So I think in terms of.
The restricted cash I guess thats kind of caught up on other currencies et cetera that isn't immediately deployable.
You just run a 20 to 25 million dollar plus or minus.
Back of the on below the the remaining part of our 410 last that is completely open to strategy the second comment.
I think the first part of your question tell me if I heard it correctly is.
We're always obviously trying to be opportunistic when we look at the capital structure, but whether I was trying to describe this kind of three priority pillars right. The first one is.
What we're looking at it from our own current ship that we have and making sure that we have proper investments.
That into our teams and into the strategies that we deploy the second really strength of pillars is more about how are we going to grow.
With the growth rate and that could be inorganic or organic acquisitions.
Obviously that that said.
Very big focus of ours, especially given market conditions, where valuations and I think some things have receded, so to speak and.
And then kind of that third capital pillar is than what you really have that true excess amount if you will on.
How do you have to turn it back to shareholders and of course everything is open for discussion around that being yields likely increase that a bit ago could be buyback could be onetime et cetera. So we're always evaluating that for the excess the answer the sub answer to your question in terms of how much of it.
As for bonuses as you know, we did I think about $202 million of cash bonuses last year at 2019.
Revenue levels, so clearly that will come down from those levels, but.
Best.
Best guess is that's the way I would think about it generally proportionately so to say.
Okay. Thank you that's helpful.
Two other kind of numeric questions.
Hi.
How much larger would consulting you have to be to get it up to what you think the.
Right kind of scaled margin would be in.
And could you quantify the savings associated with travel and entertainment.
Year to date or even for the full year. If you just assume the mid Thirtys guidance range kind of want to get a look at what that might look like as it maybe centers back into the income statement in 21 and 22.
Sure.
Chris you want to try to limit it give the.
The quantify.
Why don't ill follow up why don't you go ahead.
Sure So hydro consulting as I think we've always been.
Again, if we're managing to breakeven that really kind of that $80 million to $85 million revenue would really kind of get us in the ballpark.
That that's breakeven not the answer to your question I think your question is when you get it up to the margin levels, you would expect where do you see revenue to be in that.
Very difficult because depending on if its assessment its culture shaping if its leadership what are we going to kind of place as those are very different margin implications and again some of the new things and pmnine that they're focused on as well and again I would imagine that steady state margin would obviously be beyond the 100 million mark but it.
It's really difficult to tell you when we can get kind of into that low to potentially mid teens type of margin, where you would expect the steady state to come and Chris I don't know if you have some insights on yes look I think I'd take that trade anything sort of in the 100 hundred $20 million range.
Would start to be able to see the margins at one could expect in a steady state operation as well that could.
That could handle.
Little bit of shocks to the system as well so that's kind of the number we're targeting for that.
And the answer to your your time your Teeny question. So we usually run about $10 million to $12 million a year I'm on TNT that we kind of have floating through the gionee during cobot, obviously, it pretty much dried up to next to nothing and I.
Maybe on an annualized run rate about $1 million, so 90% of it was completely shaved off on.
And to try to give you an answer in terms of where do you think thats going to come back to it I don't see it coming back to where it was I think a lot of the consultants that I speak to.
The kind of bifurcate I think the ones, where they have really good and strong relationship I don't see a lot of trouble necessary as much as they may have before and I think theres, new relationships, where again once you get past covenant people become a little bit more secure getting on planes and traveling I think you'd see that to be more.
More normalize to where it was even though I still wonder if we'll get back up to at least from my My vision Christian I don't know if you can add on that as well. Thanks.
Yes look I think the way we work.
Continuing to evolve and we will work with our clients in a far more hybrid model.
So there will be some level of travel that is going to be required, but a lot of the upfront work will be done more virtually.
Then there's going to be for new clients and relationship development of them getting to US I was getting to them and that's going to be required and we continue to work with new clients, which is really exciting. Okay. So it's one of the the tests of of.
Have a covert world is do develop new accounts, and new clients or not and 22% of our revenue.
Came from Terje coins that we haven't worked with the previous 24 months. So that's great.
The real question is.
Can we continue to make those into larger accounts or not or.
We're going to be one off points and look there is a there was a test there and we need to test the time to be able to to figure out whether we can develop deep relationships over there as well.
Thanks, if I could sneak in a follow Mark you cited the mix of margin profiles within consulting is being nest.
Necessary to kind of predict what the future margin could look like could you just kind of highlight some of the higher margin lighting sales service and then some of the lower margins just to give us a sense for.
Where they sit.
Yes.
Tobey It really comes down to which one is more labor intensive than the other so if you think about it from an assessment point of view if it was a.
Very large.
Company with lots lots and lots of assessment you'd be able to get really great scale from that in the margins would obviously be much stronger than what I would say would be individual leadership assessments and ability to helping coach where it's more one on one one onto one on five so those are obviously going to be much more labor intensive and cost focus on our DNA Dinesh.
It's kind of is that what I would call the that in between right, where you are really trying to help both from a cultural point of view on a company point of view a leadership point of view again, there is some good scale, but yet a lot of heavy lifting that needs to go on which our teams.
We're just doing a phenomenal job so.
I wish I could really break it down it really depend on.
What kind of plant we have the scale of the client and what is the lifting that needs to be done and specifically to the spoke model that they're looking for from us.
Thank you.
Sure.
Your next question comes from the line of Kevin Spanky with Barrington Research. Your line is open.
Hi, good afternoon.
Obviously, you talked about revenue trending better than you'd expected in the third quarter.
Wonder if you could maybe just going to give us a little more context around.
What changed relative to what you had initially expected down 10% to 15% sequentially to where it came in just maybe in terms of no customer.
Customer attitudes or.
What you're hearing from the market that.
When able that better than expected performance.
Sure Kevin I'll happy to try to take that question for you. So I think we saw real.
Really kind of three.
Three events that took place that really.
Was surprising on the upside right I think the first one is the number of engagements. The market was there more than we thought it may be especially going into the summer months.
We were expecting it to slow down a little bit more which it didnt do and I think our team just did a phenomenal job executing.
And then turning to grab the market share while I was there. The second is the value. So we didn't see as much softness and the value of the engagements that we were doing and so again and that came from strengthen our industrial practice strength and obviously, our health care life Sciences was very strong so.
We saw some really interesting acute situations, where it came in much better than we had anticipated and then I would say the third one was the uptick see upticks really delivered about 30% ahead of anything that we were estimating on our side and I think thats just going back to the resilience of the market where people are still looking for good talent, especially.
Given the complexities of everything that the headwinds are not just covered I mean, you can look at it from.
The question was just asked you got new tax regimes potentially coming in you've got the elections coming you've got Brexit to deal with and of course, you've got Kobin.
So really skilled individuals coming to really help companies out in a in a sea of complexity and people willing to pay for the talent to get them in the door to help them achieve that so.
All three of those really kind of weighed on against has made us a bit off in our in our average selling but I.
I would always boils back the team did just a fantastic job in executing and really doing a good job in market.
Let me, let me just add to that look I think that.
The clients.
Really liked our transition how seamlessly transition to the digital offerings as well.
Particularly on large complex project. So I referenced one on I spoke earlier I mean look we're able to convene a 100 plus consultants to solve clients problems. Okay.
Yes.
Using our platform and how we could do that said, we're solving some pretty complex problems and I think that.
The ability for.
Our terrific team and the platform to be able to drive that.
No was terrific coming and we may be underestimated them a little bit.
Okay, No that's that's great color.
And.
You talked about reducing your real estate footprint.
I believe you said to match the new normal.
I just want to make sure I clarify what you mean by new Normals, that's just kind of new normal in terms of way of working or.
You know, it's some sort of change in the demand environment I guess.
Yes, it was more it was more intended.
In the way of working I mean, we fully expect.
People will be coming.
Coming into offices, but more than a hybrid model.
So I think it's to reflect that not.
Demand.
Okay. So does this is the new real estate footprint.
Contemplate some folks working at home permanently or is it more kind of that.
Office Hoteling.
It's both.
It's both where we are.
We will be publishing our remote policy.
For next year, and there are people who elect to work remotely.
As a result of that policy as well, we'll respect that so it's going to be a mix and I think in that mix. We know some people will be wanting to come in to the office Nevertheless, too.
To be part of.
Collaboration innovation culture, there's lots of reasons to do.
To do that and we want to have the right space.
And we will be using a different approach would how we utilize that space.
Okay, Great and I wanted to ask about.
A comment you made about significant enhancements to your CRM platform, just maybe if you could talk more about that.
And the benefits you're seeing from that initiative sure. Yeah. So so this was the we've completed implementing our upgrade to our.
To our to our platform and as a result of that.
The insights that we can glean.
Across searches.
It has gone up by a factor. Okay. So we can now go to clients can be able to talk to them very analytic way about how long it takes to be complete searches.
What happens in typical sort of just so there is a lot more data that read data rich stuff thats flowing through that allows us to run analytics.
I was just have very different conversation with clients. So this is.
This is for searching for consulting so it's a terrific new platform, we're excited about that.
Okay, Great. That's all I had thank you.
Thanks, Kevin.
Your next question comes from the line of Tobey Sommer with true your line is open.
Thanks.
Just wanted to see if you could give us some color about your monthly trends you said that.
Business rebounded after a seasonal low over the summer Australia in September and that carried through into October.
October running at the same rate.
September.
Because my understanding is that might even seasonally be a little bit stronger in a normal year.
So what we saw what we expected to see it was obviously August being a summer month and I again, I would expect people to kind of slowed up, especially after the the amount of in shelter in place.
During the Covance.
What we saw in September was was very strong.
Certainly not what it was in 2019 levels, but certainly.
Up an escalation beyond the old.
Trends that we saw at the beginning of the covered period October seems to be trending in a very similar fashion, it's difficult because we haven't closed the month yet but.
My comment would be is it.
It's definitely going to be within both striking distance of similar numbers, but we'll see where it comes out we still don't know yet.
Okay.
And then I just have a.
Sort of an acquisition.
Acquisition related follow up the.
Write offs goodwill in Brazil, how does that compare to.
The size of the overall business acquired and.
Is there anything to be leased from.
This experience in terms of the size and scale of a potential target acquisition in the future something that might be.
Kind of bigger more resilient I think is.
Christine mentioned able to kind of get you to a scale, where you can resist some ebbs and flows in the business from a profit perspective.
Sure I mean, I think just to correct something we did not.
The Google in Brazil was was very minor the goodwill the impairment that you saw in Q3 was really focused on acquisitions.
Older acquisitions in Europe, and in Asia Pacific.
Like 12, 15 years ago. So the new acquisition that we just did with our Brazil entity is not in the cards just to be clear.
And with respect to the second question about.
Scale.
In your acquisition outlook.
Toby can repeat that part of the question do you Trust me off at the Brazil, Yes, that's Uh huh.
All right sure.
I was.
Wondering if you could.
Comment on.
The scale, what you've done in recent years is relatively small.
Seems like to get the consulting business you got to.
Get something a little chunkier or is.
Is that how we should think about are you comfortable knitting together multiple smaller acquisitions to get to get you where you need to be.
Yes, and this is one that I know Christian I will definitely jump in on.
I think our overall comment is when we look at what we want to do strategically obviously, there is a lot that needs to be done on from an internal point of view, but we know that inorganic is going to be a careful component of our strategy. So we would expect as we kind of go through the growth that we want to see over the next.
Couple of years, it will definitely be a combination some of that will be a function of competencies in house. When we married him and look at them competence out house and if there is an acceleration acquisition to deal we will in terms of its size.
As you know, it's really more of a function of fit and making sure. It's in the right sweet spot from a return to our shareholders versus anything else and if thats a big ticket acquisition will pull it if it's a lot of small tickets will pull that too but.
Chris on let me turn over chicks I think you've got some pretty good insight.
Yes look I think Mark you hit it on the head I think you know.
We tend to think about it in terms of fit.
These strategic fit and what will drive and the culture fit.
How does it plug into what we are building as a culture here as well. So I think those are the two.
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Mean lenses that kind of accrete interest and then obviously through the financials underneath that so that's.
That's how we come to think about it so.
It could be large and it could be smaller, but it's going to have to fit and it's going to have to continue to focus at the top and it's going to have to continue to drive the agenda and be something where we still can go Tweed.
To market as one firm as well.
Inside of that consulting umbrella, so jintai consulting thats, what is going to look like.
Yes, thanks for taking my question.
Okay.
Okay. If you would like to ask a question press star one on your telephone.
There are no further questions at this time I will turn the call back over to Chris.
Thank you Tom look let me just quickly summarize.
As you can see we continue to operate and transformed this business soon.
Highly dynamic world.
And.
As you can see where we are focused on driving some results as well and in that context, what we talked about today, we have right sized this firm.
We're winning both new clients and we believe winning share.
We're innovating our offerings.
We are innovating our operating model you heard mark speak to our real estate strategy, we'll be doing there.
And we continue to focus on our more valuable.
Asset our people.
And we will continue to not only develop but also to promote on that cycle is underway.
It really important part of our refresh cycle as well so in short we're setting ourselves up for success in 2021 and beyond.
And.
And we're kind of happy with the progress in this last quarter and look forward to continuing to drive Ed. Thank you all for joining our call.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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