Q3 2021 Korn Ferry Earnings Call
[music].
Okay.
Ladies and gentlemen, thank you for standing by and welcome to the Korn Ferry.
<unk> third quarter of physical year 2021 conference call at this time all participants are in a listen only mode. Following the prepared remarks, we will conduct the question and answer session. As a reminder of this conference call is being recorded for replay purposes.
We have also made available in the investor.
The relations section of our website at Korn Ferry Dot Com a copy of the financial presentation that we will be revealed and with you today.
Before I turn the call over to Mr. Gary Burness. It let me first read the cautionary statement to investors.
Certain statements made in the call today.
Such as those relating to the 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 and investors are cautioned not to place undue reliance on such statements.
Actual results in future periods may differ material materially from those currently expected or desired because of a number of risks and uncertainties.
Which are beyond the company's control of.
Additional information concerning such risks and uncertainties can be found in the release relating to this presentation and and the periodic and other reports filed by the company with the SEC, including the company's annual report for fiscal year, 'twenty and 'twenty in the company soon to be filed quarterly.
The report for the quarter ended on January 31st 2021.
Also of some of the comments today may reference non-GAAP financial measures such as <unk>.
Constant currency of Mt.
EBITDA and adjusted EBITDA additional.
Additional information concerning these.
Measures, including reconciliations to the most directly comparable GAAP financial measure 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 Ww.
And you W. Dot Korn ferry dotcom and with that I will turn the call over the Mr Burn of Syn <unk>.
Sir the floor is yours.
Well, thank you, Steve and Hello, everybody welcome to our third quarter earnings call. You know this is the first call of the calendar year and before we talk about where we're going one.
And the step back for a moment and discuss just how far we.
And we've come you know it was almost a year ago, the great uncertainty filled the world and I predicted that we would see more change and and ceiling of two years and in the past 10.
And is a leading global organizational consulting firm corn.
Korn Ferry is now of right at the center of that stage and.
And during this time of our colleagues of shown incredible resilience.
Williams, and see and purpose resiliency and hope and the resiliency and serving clients and the success is deeply rooted and our vision our values.
Is how we see the world.
All of the World seems us and how we've been translating all of this and the executing our strategy.
And fulfill our vision and position our company for accelerated growth and long term success, we focused on a few key strategic pillars, we're driving.
And integrated solutions based go to market approach that facilitates growth and enduring partnerships with our marquee and regional accounts.
Central to more scalable and durable revenues, we continue to advance Korn ferry as the premier career destination two of <unk>.
Tract and retained.
And top talent and the last two quarters. We've brought on about 70 senior commercial colleagues to strengthen our bench of talent across the globe and as we look for where we're focused on opportunities that will strengthen our solutions and create shareholder value.
The focused execution of.
And he has transformed our business into a more efficient profitable growth oriented organization, we are far less economically cyclical today.
And then in any point in our history the.
Time to recovery much shorter.
The trajectory of the recovery much steeper.
Our revenues more visible and scalable.
Our client solutions more impactful our people the absolute best and the industry and our data and IP. It's.
Deep rich and <unk>.
Absolutely best in class.
And important.
Part of what differentiates US is we're the only consulting firm to combine org strategy leadership and professional development assessment and succession.
Awards and talent acquisition and we've taken the integrated approach across these categories to help clients execute on their strategy and are increasingly.
Singly digitally enabled world.
Underpinning all of our offerings and solutions is our world class IP.
Putting us in and Unparallel position of strength and so.
And I think about it we've got more than seven decades of experience data and innovation at the end of the third quarter, we hold.
And as data for over 20 million people over 70 million of assessments had been taken.
We've got organizational benchmark data on 12000 entities, we have 3900 individual success profiles covering almost 30000 job titles are proprietary recruiting.
The reward I tool is compiled more than 550 million profiles of potential candidates across the globe every year, we train and develop nearly a million professionals and certainly last but not least each business hours and we place a candidate and a new job every.
<unk> minutes the.
Best way to demonstrate all of this those through our performance.
During this last quarter, our third fiscal quarter, we delivered results that were substantially higher than in prior cycles, our business rebounded dramatically revenue was up about.
About 9% sequentially to four.
<unk> $75 million and our earnings and profitability reached record highs with.
About $97 million of adjusted EBITDA.
And a little of them for a 20% adjusted EBITDA margin and the sharp improvement that we saw on free fee revenue on our fiscal second quarter.
400 continued and the third.
And it just it doesn't just reflect improved global market conditions. These results are directly attributable to our strategy and I'd like to share a few proof points from the quarter that highlight how far or long term strategy was.
Warner can hold.
Our diversified business exhibited more resilience now then and the great recession back then our fee revenue and the quarter immediately.
During the peak quarter.
Was down approximately 43% two quarters out it was still down 32% now if we fast forward a few.
It's taken us and look at the COVID-19 recession the.
The decline and fee revenue from the peak quarter was only 16% and two quarters out were only down 8% that's a substantial improvement from.
From the great recession.
When looking more closely at our go to market strategy.
Two years, we're seeing measurable progress and selling subscription based solutions and our digital business year to date subscription base fee revenue grew 27 per cent.
Our third quarter, new business that was subscription base was up 123% year over year and almost 48%.
Rajeev sequentially and we're also as we've talked about we're continuing to see success and capturing larger consulting engagements, we reclassify those at.
They don't have a value of 500000 of more of these and grades of these engagements are absolutely driven by our integrated solution strategy that provide us with.
<unk> enduring client relationships of scale year to date large new business consulting engagements were up 23% and.
And these large engagements are also driving a growing backlog of 24% year over year, which obviously enhances revenue visibility and.
And durability.
With more and as I mentioned earlier, our marquee and regional account programs continued to deliver less cyclical more resilient and new business and revenue and the rest of the portfolio.
And the third quarter, our marquee and regional account fee revenue declined only 2% year over year, while the rest of the portfolio was down about <unk>.
For Sun and not a year to date basis, our marquee and regional accounts they've been relatively impressive.
And it's up 1% year over year, while the rest of the portfolio declined 13%.
And our cross line of business referrals again validates our strategy it was about <unk>.
11 years ago, our cross referrals were about 15% of our portfolio today that number of stands at 26%.
We're proud of what we've accomplished and how we've continued to extend elevate and recast the Korn ferry brand, both externally and for our colleagues.
And so brand absolutely embodies the way of the world sees us understands us and wants to be of part of what we're doing we've never been more committed to helping people exceed the potential with an abundance of opportunity, we're changing people's lives and the work of our DNI practices, absolutely breaking barriers.
This is one of the top areas of focus for our clients and we're the leader and that area and I'm also very proud of the launch of leadership you for humanity and nonprofit venture of the Korn Ferry charitable foundation focused on developing the total mosaic inside communities and within corporations.
And our long term goal is to take our expertise and IP and develop 1 million new leaders from diverse backgrounds and using our Korn ferry advance and leadership you platforms.
I've always said that it's our people first clients next and everything else will follow and that's why we're also offering.
Leadership, you for Korn ferry to develop our own colleagues from all backgrounds, and providing them with opportunities to grow and advance. Its this commitment and focus that may Korn ferry of career destination accelerating the development of colleagues across.
Offering from <unk>.
No doubt the pandemic has caused seismic changes in society and and business different work is absolutely getting done and that work is getting done differently and Korn ferry's at the center of that transformation.
We know the problems are never solved.
<unk> stuff and the absence of people.
Solutions will only emerge by cultivating a workforce that is diverse and collaborative.
And motivated looking ahead, it's about leveraging our data and IP.
Delivering larger more impactful consulting engagements addressed.
Addressing the Mega trends that are reshaping, the corporate landscape and driving accelerated revenue growth for.
Of the firm.
And I truly feel we have the right focus.
And with the right people at the right time to accelerate through the term and cash.
Olander 'twenty 'twenty, one we will continue our commitment.
And then to build the preeminent global organizational consultancy.
I look forward to what the year brings us and I'm going to turn the call over to Bob Rozek, who is joining us as well as Greg turbocharged Bob.
Great. Thanks, Gary and good afternoon, good morning, everybody.
And as Gary said, we're very proud of our third quarter results, we view them as a testament to the efforts of our Korn Ferry's colleagues there.
Two of less cyclical firm with more resilient and durable base of fee revenue that will generate.
And our sustainable scalable earnings.
Gary you made reference to Mega trends that are changing the corporate landscape.
Items like accelerating digital transformation driven by the pandemic.
Calls for a long overdue social change and the increased corporate and emphasis on ESG.
<unk> news, our comprehensive set of solutions and.
Formed by your deep rich collection of data and.
And intellectual property are highly relevant and in line to help our clients need in each of these areas and and.
Importantly, they serve as a real point of differentiation.
<unk> for Korn ferry.
Let me turn to some of our third quarter results.
As Gary mentioned fee revenue and the third quarter was $475 million now that growth was broad based with fee revenue improving sequentially for the second consecutive quarter in each of our business.
<unk> units and <unk>.
Additionally fee revenue growth and the third quarter. This is measured year over year was up 7% for our Po.
And was flat for North American executive search, which is actually seeing business activity.
Back at pre pandemic levels.
We also saw.
Substantially improvement and consulting and it was the only down 3% year over year.
And and professional search that was the only down 2%.
Year over year.
More importantly earnings and profitability surged to record highs and the quarter on.
Our adjusted EBITDA.
The $31 million of 46% sequentially to $97 million and our adjusted EBITDA margin improved 510 basis points to 23%.
Adjusted fully diluted earnings per share also reached a record.
<unk>, Google and the third quarter improving to 95.
And that was up 41 or 76%.
Essentially.
And up 20 or 27% year over year now it's important to note that full employee salaries have been.
<unk> lumpy the effective January one 2021. In addition, we booked accruals for November and December to pay all employees their full salaries for both of these months.
So similar to the second quarter, our cost structure in the third quarter reflects 100%.
<unk> of all employees compensation costs.
Now, let me turn to new business that also continued to improve and the third quarter.
Our new business awards, excluding <unk> were down only 1% year over year on a sequential basis.
<unk>, new business growth and the third quarter also showed for.
And based improvement consulting was up 8% digital was up 14% executive search was up 8% and professional search was up 31%.
Our balance sheet and liquidity.
We remained very strong.
And at the end of the third quarter, our cash and marketable securities totaled $897 million now if you exclude amounts reserved for deferred comp and accrued bonuses, our investable cash balance at the end of the third quarter was approximately.
<unk> $534 million, which is up $73 million sequentially and up $112 million year over year or.
Our balance sheet strength is due in large part to the steps, we took and late 2019 to refinance our debt with long tenured.
On the leaf with debt Securities and we also restructured our credit facility and anticipation of a potential downturn.
And we did that because we wanted to position ourselves to be able to weather the storm and invest into the recovery now to date, obviously, we have successfully managed and adapted our business to.
<unk> environment, and we are now investing back into the recovery.
Gary mentioned by hiring 70 senior commercial colleagues over the past two quarters.
So with that I'm going to turn the call over to Greg who will review our operating segments in more detail.
And do the job.
Starting with our digital segment global fee revenue for KF digital was $76 million and the third quarter.
Consistent with the second quarter, the subscription and licensing component of KF digital fee revenue and the third quarter was $23 million.
Global new business and the third quarter.
Thanks for the digital segment grew 14% sequentially to $100 million the.
The best quarter of new business since the beginning of the Covid recession.
Additionally, 43% of new business and in the third quarter was subscriptions and licenses, which is the highest portion of any quarter to date.
<unk> adjusted EBITDA on the third quarter for KF digital was up $4 million sequentially to $27 $1 million with of 35, 8% adjusted EBITDA margin.
Now turning to consulting and the third quarter consulting generated $136 three.
<unk> $4 of fee revenue, which is up approximately $9 5 million or 8% sequentially and down only 3% measured year over year.
Growth in each of the our solution areas improved and the third quarter enhanced by our virtual delivery capabilities.
Consulting.
The new business also improved and the third quarter sequentially Global New business was up 8% with growth and every region.
Adjusted EBITDA for consulting and the third quarter was up $7 $3 million sequentially to $27 $5 million with an adjusted EBITDA margin.
Salting of one 2%.
RP on professional search global fee revenue improved to $95 2 million and the third quarter, which was up 11% sequentially and up 4% year over year on.
<unk> revenue was up approximately 4% sequentially and professional search.
Fee revenue.
And was up approximately 24% sequentially as.
As previously mentioned measure.
The measured year over year RP of fee revenue was up 7% and the third quarter.
With regards to new business and the third quarter professional search was up 31% sequentially.
And of <unk> was awarded and another $44 million of new contracts, consisting of $12 million of renewals and extensions and $32 million of new logo work.
Adjusted EBITDA for RPM professional search on the third quarter was up approximately $5 8 million sequentially to 19.
And <unk> million dollars with an adjusted.
Adjusted EBITDA margin of 26%.
Finally for executive search global fee revenue and the third quarter was $168 million.
Up $20 million or 14% sequentially with growth in every region.
Sequentially North America was up approximately 16%, while EMEA and APAC were up approximately 14% and 4% respectively.
The total number of dedicated executive search consultants worldwide at the end of the third quarter was 522.
Which was up 10.
Sequentially.
Annualized fee revenue production per consultant and the third quarter improved to $1 3 million and the number of new search assignments opened worldwide and the third quarter was 1300.
And the third quarter adjusted EBITDA grew approximately $13 $4 million sequentially.
$41 $7 million with and adjusted EBITDA margin of 24, 8%.
And I'm going to turn the call back over to Bob to discuss our outlook for the fiscal fourth quarter.
Thanks, Greg over the past two quarters the volatility the challenged our visibility.
True into monthly new business activity has subsided.
In addition, the global business environment appears to be becoming more stable.
For now and are positioned to identify trends and how the impact our business and as a result of that we've decided to reinstate guidance.
Historically the fourth.
And it's been our strongest quarter and any fiscal year.
Current new business activity continues and the normal seasonal patterns hold we expect that new business and our fourth quarter will remain pretty strong considering.
Considering this and assuming no new major pandemic related loss.
Quarter loans changes and worldwide economic conditions financial markets and.
And foreign exchange rates, we expect our consolidated fee revenue in the fourth quarter of fiscal 'twenty, one to range from 475 million to $500 million and.
Locked down solid eight diluted earnings per share to range from 95.
Two of $1 five.
Our third quarter reported and our fourth quarter expected adjusted EBITDA margin.
<unk> are benefiting from elevated levels of profitability flow through.
Or can do to our top line recovering faster with the trajectory that is much steeper.
However, our current execution capacity is pretty stretched our current levels of utilization are not sustainable to support new business growth to that and we are in the process of adding additional.
Through the sources.
Further we want to take advantage of the opportunity in front of us and as previously discussed we have recently begun to aggressively invest back into our business, making a number of key consultant hires and we plan to continue the tires going forward.
With that.
<unk> as you think about our near term operating boundaries for our adjusted EBITDA margin think about it along the following line. If you go back prior to the pandemic, we were essentially of $2 billion business with an adjusted EBITDA margin of around 15% to 16%.
And as we return to the pre pandemic levels of fee revenue.
Our business will benefit from previously mentioned structural changes and we're going to add around 200 basis points to our adjusted EBITDA margin and.
And as a result, we expect near term.
The margins beyond the fourth quarter to range from 17% to 18%.
Now before I open up the call to your questions I, just want to reiterate how proud Gary the entire management team and the.
<unk> of the strong third quarter performance, we announced today.
The data we've taken significant steps in recent years to strengthen our business model.
Enhance our financial profile and really position Korn ferry for success, the sharp acceleration and our financial performance in the second and third quarters.
It gives us tremendous confidence.
The strategy is working.
And that we have the right initiatives in place to continue to increase our market share.
And deliver sustainable value to all of our stakeholders.
With that I'll conclude remarks, and we'd be glad to answer any questions you may have.
And that our ladies and gentlemen, we will now begin the question and answer session of today's conference.
You wish to ask a question. Please depress the one followed by the zero on your Touchtone phone, you'll hear of tone, indicating that you placed yourself and queue and all of the questions will be polled and the order. The hour received you may remove yourself at any time by once again depressing.
And the followed by the zero and you touched on phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
Our first question will come from the line of George Tong of Goldman Sachs. Please go ahead.
Hi, Thanks, good afternoon.
You indicated that new business <unk> was down.
And the Wasatch and year over year and physical <unk> can you elaborate on the trends by month and the quarter and also talked about how the trends have evolved through the months of February and perhaps also touch on digital and noticed.
It was down 12% year over year and the quarter, just what was happening there.
Bob.
And 1% handle though.
Sure, Okay, Hey, George.
If you look at the Hey.
Hey, how are you doing if you look at the new business trends in the third quarter.
There was no real discernible pattern and each month.
From a year over year perspective.
Was.
Essentially flat with where we were on last year.
We saw this.
From an overall perspective.
And the exec search the patterns were the same and.
The pro search we actually saw.
A large spike in new.
Business in December and.
On November and January were.
Down a little bit year over year, but the new business growth and pro search and we had a big spike in the month of December and the.
The consulting side.
Really strong new business every month.
And the quarter.
<unk> per.
Particularly in North America.
North America consulting businesses is just on a fantastic job.
On the digital side, what we're seeing is we actually had the highest new business since the pandemic started although was down.
<unk> percent.
<unk> year over year.
And I would say the decline that we saw in.
And the digital and new business was primarily focused in two areas one was pay.
Coming through the pandemic the.
The desire for pay data for pay raises.
Was dampened.
And on a year over year basis.
But the larger impact comes from the training the in classroom training and what we've seen there is the.
The in classroom training when the pandemic first hit virtually stopped.
And then there was a shift from and classroom.
Two the virtual training and in fact, if you go back to the sort of <unk>.
<unk> February timeframe.
In classroom training was about 97% or 98% of what we delivered.
Today, it's about 3% of what we deliver 97% is virtual.
And what we haven't seen yet George as the volume in the number of.
Training is delivered.
Bounce back quite yet.
And that's on the horizon for us and should stimulate.
Good growth once that comes back to.
Pre pandemic levels.
Got it that's helpful and and how have those new business trends.
Volume through the month of February and whats the contemplated currently in your quarterly guidance.
Yeah, So I would say George if you look at the month of February and it's it's it's a little bit challenging because we do get a lot of new business at the end of the month.
But through right now of about 75% of the way through the business days and the month and I'll do it from two perspectives one is geography.
And then I'll look at it from the line of business perspective, so from a geography perspective.
North America, just firing on all cylinders year over year and sequentially.
And the rest.
Rest of the geographies are still have not quite up to where they were last year.
From a sequential perspective, they continue to make very good progress.
From the line of business perspective exact search and pro search are starting to gain momentum.
Consult.
<unk> is performing very well sequentially and.
And year over year.
And then our Po.
Continues to have a strong.
The backlog of pipeline I should say of.
The opportunity so we expect that new business to continue.
Very strong and then.
And you touched on digital.
Yes, very helpful and just a quick quick follow up you mentioned debt longer term EBITDA margins beyond the <unk> should range in the 17% to 18% area. When do you expect to fall within that range is it going to be of fiscal.
2022 event or some other timeframe beyond that.
No it'll be it'll be fiscal 2022.
Got it thank you.
Our next question will come from the line of Tim Mulrooney of William Blair. Please go ahead.
Good afternoon.
Cool.
Hey, Tim.
Hey.
So a couple of questions first just on your verticals you guys give a breakout for fee revenue by industry.
And I'm wondering if you could discuss which of these verticals stood out as pockets of strength from the quarter for those that are.
Currently strongly.
Afternoon, Brian versus those that of either decelerated or have yet to recover.
Well, we've seen a sequential increase across the board and all of the all of the industries and markets.
That we operate in and when you look sequentially technology.
Was clearly a big driver of out of that was up about 16% sequential life Sciences and healthcare.
Which is a bellwether practice of ours I think we've got the best practice.
Practice and the business that was up 11% and even industrial which is the largest piece.
And of Korn ferry today, it's about 28 per cent of the overall portfolio and it was as high of 30% to 31%.
That was up two and that was really good to see and even energy as counterintuitive as it may sound and that was a that was up about 8% as well.
Okay. Thank you.
And that's surprising to hear about the energy that's the good news.
Moving to your digital business just on the profitability. The revenue was down 25% credit, but I think but EBITDA margins expanded nearly 10 percentage points year over year, and I know theres been some cost takeout, but were there other contributing factors.
Factors as well like maybe of sales mix issue or were there any I guess, one time or seasonal factors you'd point to here or is 35% profitability a good run rate to think about for this business.
Yeah, it's it's probably not I mean, the you know as Bob talked about Theres, a theres a major transformation that's happening.
And then.
Within that business and you know many quarters ago, we went to take our IP.
And try to to changed thousands of People's lives and to alter the destination of our clients, giving them IP that they could license and use too.
Improve their performance and so what youre, saying there is there is a massive shift that we're making not only and the in the consulting and services.
Services that we deliver we're purposely over the past two years, two and a half years, we've been jettisoning small.
All of our consulting engagements and pursuing bigger and more impactful engagements.
And on the digital side, we've shifted towards a subscription based model and with the model. We're finding that that revenue will be more durable visible.
But it will also be recognized over a longer period of time, so that's a pretty big change for.
Say two three years ago, and so we're very pleased and happy to see that and the C. The integration between the consulting and the digital businesses.
And so the.
The the margin of 35% I forget Bob can tell you what a year and a half ago. When we first of broke out the digital segment, what we were targeting.
As a sustainable margins and that's clearly I think.
35% I think was definitely at the upper end of the target that we laid out.
And so I would I would tend to look at something more like the 30 or so could be a little less could be a little bit more I.
I think that's more realistic given the investments that we want to make to capture.
The market opportunity there.
Yeah, Yeah, and the only.
The.
And Gary but on the other thing I would add to that is you mentioned the digital revenue being down.
25%.
From point of sale solutions to longer terms of subscriptions.
Subscriptions.
And another 20% relates to the Tam.
Temporary decline in demand for pay data.
And then the rest of it would relate to the issues that I talked about on the.
The training delivery of the trading.
The days.
Yeah. Okay. That's helpful. I appreciate that color. Thank you and congrats on a nice quarter.
Great.
Our next question will come from the line of Mark from our corn of Baird. Please go ahead.
Hey, good morning, or good afternoon, depending on where you are.
Congrats on the great quarters.
And more importantly, just the the overall trajectory of the business and on the long term progress Gary I was wondering if you could talk a little bit about you know where are you.
And you're making the investments you mentioned that you brought on.
70.
Tenured.
On highly.
Really qualified professionals.
Wondering what areas are they and it also sounds like you're making more additions so where should we think about the internal investments going where are you seeing the highest level of incremental demand relative.
To your current capacity.
Thank you Mark for the kind.
Kind words.
Well the place that I'm very excited about and we're knocking and necessarily say that in in a quarter or a few months, but the professional search market is a massive market and.
It's.
It's probably $25 billion could be as high as $50 billion and.
And our.
Our business today is probably about the 100 and <unk>.
$60 million annually, so on something like that and so it represents a real opportunity.
And it's obviously.
We're in the business today and.
And that's something that I think we can we can see is over time.
And so you will see us, making more investments for sure into the into that segment.
We've been we have been investing.
Heavily into not only the digital platform, but our consulting capabilities across the board so well.
And whether that's the consulting business or the executive search business.
And we've we've definitely been bringing in people to add.
The talent to the bench so.
The those would be the the areas of the RPM business is doing very well, we continue to add talent and add logos there.
So it's you know, it's it's been split pretty evenly between between our businesses, but the one you.
You really haven't seen yet is pro search.
And within within Pro search can you talk about like the areas, where you're seeing of.
The highest level of incremental demand it sounds like December was a blowout month.
Are there any sort of common characteristics in terms of.
Of of where that surge came from.
Digital and technology.
For sure and even finance and accounting.
So you know, it's it's probably what you would extract and were saying and incredible appetite.
And the world to get people that are digitally.
Sadly that are technology.
Enabled and so we've seen very very good and draw.
Drivers there, but you know the business quite candidly.
Is just the woefully under size to the market opportunity.
And you know that's a pretty and so that's.
You know kind of a blanket statement I mean, whether it's in the Americas or Asia or Europe, I think we've got the substantial runway ahead of us.
And that runway of again, it's not and a few months, it's it's not a quarter out but here and the very near.
The term.
I think youll see us seizing on that market.
Or are you sourcing those clients through.
Existing executive search or RP O relationships, what's the.
Obviously, there are other competitors within that space.
None with you know kind of the.
You know the.
And the type of reputation at Korn ferry has but.
There are other competitors out there and just wondering who you are who you are gaining the business from.
Yeah. The when you look at the you know one thing that I'm very proud of is the the cros.
Cross referrals and so it's been going up every quarter. This last quarter. It was 26 per side.
And when you look at pro search this last quarter. It was actually 53 per cent.
<unk> was 49% so yeah, that's really coming from the executive.
The search channel so even though the the the market size of executive search.
Is a fraction of the market opportunity for us it's incredibly strategically important people return on our calls and so I think we've demonstrated that we can take that access of that brand permission.
And do other things with it so yeah, mark its coming from the executive search channel and a big way.
Great and then can you talk on the consulting side, which which areas are and you're seeing the strongest growth and within <unk>.
Your consulting at this point.
The it's again I'm going to [laughter] it.
It's been pretty broad based I mean, it ranges from our executive pay business, where we've won a number of fortune 100 mandates to do compensation and advisory services to.
Two organizational transformation and I can think of two for.
And 100 companies that are trying to get into a new business and they are turning to us around the org structure around the people they need assessment.
On development.
And then the you know the DNI business continues to flourish and and that has for.
A few months, but.
It's pretty broad based when you look at the the things that we're doing and are are you now.
Training business are learning and professional development business is also doing well, where we've won some pretty substantial mandates for compass.
Companies basically using our Korn ferry advance platforms of leadership, you platforms and the outsourcing.
Their development the Korn ferry.
Greg can you just one last one on the D and I can you give us an update in terms of the size and then.
And just to be clear and to what extent the D. And I also include potential engagements either on the executive search or the professional search side in terms of.
Broadening out the.
Candidates for the talent that your that your clients have.
Yeah.
The when we talk about it.
And I and this contacts we've just been talking about pure.
Advisory or digital services now, there's a much broader thing that's happening and the world and the C suite and whether that is executives that are.
And have decided you know, it's it's time to.
And to move on them you know this this whole pandemic and I think has given a lot of people reason to kind of reset and to look at life and say, what's important and so we're saying and I think youre going to continue to see a lot of C suite.
Change there as well as companies that are having to reposition their business and.
And then another mega trend within that would be the focus around diversity and inclusion and.
So.
And is also.
And we're benefiting from that.
And our search businesses and so we've made some pretty significant investments.
And we're going to make more around our executive search and professional search.
Recruiting platforms too.
Capture to capture that.
On the change.
So yeah, the the DNI consulting business and <unk>.
And it's almost nine digits I mean, it's a substantial part of today's Korn ferry.
Congrats and thanks.
Thank you.
Our next question will come from.
The line of Marc Riddick of Sidoti. Please go ahead.
Hey, good afternoon.
And most of these clusters anyway [laughter] first of all I just wanted to address so so much of the the planning and the work that's been done over the years and sort of put yourself and the decision was certainly just subsidiary.
There was certainly evident and and a lot of the number of sites were reported and your commentary and then we really do appreciate the color and the detail of that I was wonder if you could talk a little bit about I think you mentioned as you've mentioned, a D and I quite a bit and and.
And prior quarters, I think you made mention of ESG, a little bit and I was wondering if could touch a little bit of maybe what.
What youre seeing there and and how that might relate to some of the commentary that we're getting from your customers.
Well we.
Purposes, not a slogan.
Purpose is the why are companies and business.
And.
And every CEO.
And.
You know of business has started for a reason and that's the why and and.
And that's the purpose.
And over the last several years that purpose.
<unk> expanded and its expanded to take on.
On different different lenses and so we clearly have been positioning the company as you alluded to to take that on.
And when it comes to ESG.
And we'll see we are today.
Marketing.
And capability and is there.
And we'll just have to.
See where the world goes in terms of.
You know what the what the environment is really going to look like.
But we clearly are positioned to help companies there are.
The there's no.
And the about it and you know the the starting point for us was the.
The the diversity equity and inclusion business that was an investment that we made about eight years ago.
And I can't say, we were necessarily.
And predicting what the future was going to hold but the theme on.
And what you hear it was it these are consistent decisions that have been made over many days many months and in fact, many years and Bob alluded to it and his comments I mean, you know it was.
And back in 2019, where we got concerned.
The about May.
Maybe a possible recession, and we took a number of actions to position the company to accelerate through the time and so you know and that's exactly that's exactly what we've done.
Great and then I was wondering if could talk a little bit about.
And maybe with the benefits and the progress that you've made with marquee of counsel and and <unk>.
Some of these cases and these are global players.
Players that they can maybe provide I would imagine some greater visibility and insight as to what plants and maybe outside of North America. So just wanted to touch a little bit on maybe how are maybe some of the initial.
Things that you're seeing outside of North America, or maybe some of the learnings that you're getting from North America and that could then be translated to the Asia, Pac and and and and Europe going forward.
Well I think the biggest you know the the biggest for sure is culture.
Which is.
You know the way and organization gets things done so.
Clearly that's been a megatrend and across the world how they engage with customers what the customer experience looks like.
That's that's been pretty consistent North America has clearly been more.
Agile.
And for a whole host of reasons in terms of responding to the environment.
And there's no reason to believe that that will not happen.
In Europe and in Asia.
<unk>.
We're now in.
And of this iron man, we're definitely I think more than halfway there and.
With the vaccines with the UK schools opening up March as you know Theres a lot of lot of positives out there.
So I would expect the same kind of you know Jill.
<unk> adaptability change.
And that's going to happen with our clients and south.
South America, and and Europe, and Asia as we've seen.
In North America.
Okay. That's very helpful. Thank you very much.
Our next question.
And I'll come from the line of Tobey Sommer of Truest Securities. Please go ahead.
Thanks, Chris.
You would elaborate on the transformational opportunities referenced and the slides.
And that accompany the call.
<unk>.
Yeah.
Well you know as we look out.
We really think the market opportunity.
Is about.
About $250 billion.
And there's a couple of very big pieces of that.
Beyond the.
Beyond the digital business that we have and taking our IP.
And and trying to change a lot of People's lives.
And the biggest is around learning and professional development that that's amounts of market.
And I really do believe that we can create a business like we did with RP O <unk>.
Around L D.
Learning and development outsourcing and so on.
Part of that May require and investment may require acquisition.
But that's that's in front of US there there's no doubt about it the other one is around the professional search.
Market around professionals.
And as whether that's finance and accounting professionals technologist health care.
It is a big market and we're clearly into a and.
Mobile word digital everything career nomads.
Work that works for everybody.
And I think the Korn ferry can capture.
The larger share of of that Mega trend that's happening so those would be two the.
That would come right to mind, and I'm, certainly not minimizing anything around org strategy or anything around confidence.
Compensation, and but clearly those are sizable markets and.
And our revenue today is of dropped and the bucket compared to that market opportunity.
I appreciate that I had a follow up question about the profitability.
And if next year.
And sort of couple of hundred basis points higher and the 17% to 18% EBITDA margin range.
Is it fair to assume that that's not sort of of a.
The terminal and the state point, but the business. If revenue continues to grow from there would generate some operating leverage how should we think about that.
Yes.
And we've tried to the.
The way, we thought about it was basically to say.
You know, we're continuing to make investments obviously, we've been doing it now.
Since the pandemic kind of a year, it's been a year now we had a we had a playbook.
And so the way we thought about that.
Okay, let's assume the company as you know $2 billion or so.
What would we want the target as.
And ongoing EBITDA margin, and that's where we're kind of guiding the 17% to 18%.
And we feel pretty comfortable with that now.
Yes.
So there absolutely.
And could be upside to that and that upside could come from.
SKU different pathways.
One could come from the digital business, but that that may not be and this next fiscal year that may be the year after.
Or actually.
The other place that could come from is the.
The executive search and professional search businesses.
For example outside outside the United States.
That's a very clear pathway as well so yes.
It's possible, but you know, we're obviously trying to balance.
Between our clients, our colleagues and shareholders and so that's what we're targeting for the EBITDA margin for the next few quarters.
Thank you very much.
There are no further questions in queue I'd like to turn the call back over to Mr. Bernstein for any closing remarks.
Well you know I just thank you for for listening you know as paradox or is it may sound. When you know when nothing seems to be progressing.
One can actually.
And make the most progress and.
And when everything appears unchanged externally.
We experienced tremendous growth internally and when things seem.
So far away they are much closer than they appear and when we clearly see how far we've come and we appreciate more fully just how capable.
<unk>, the com and I'm very very proud of Korn ferry and for what the future holds.
And.
Thank you very much for listening and we look forward to speaking to you next time thanks everybody.
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