Q2 2022 Korn Ferry Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by and welcome to the Korn Ferry second quarter fiscal year 2022 conference call. At this time, all participants are in a listen only mode.
During the prepared remarks, we will conduct a question and answer session. As a reminder, this conference call is being recorded for replay purposes. We have also made available in the Investor Relations section of our website at Korn Ferry Dot com a copy of the financial presentation that we will be reviewing with you today.
Before I turn the call over to your host Mr. Gary Burleson, Let me first read a cautionary statement to investors certain statements made in the call today, such as those relating to future performance plans and goals constitute forward looking statements within the meaning of the private Securities Litigation Act of 1990.
For 1995 excuse me, although the company believes the expectations reflected in such forward looking statements are based on reasonable assumptions investors are cautioned not to place undue reliance on such statements actual results in future periods may differ materially from those expected or desired because of.
A number of risks and uncertainties, which are beyond the company's control additional information concerning such risks and uncertainties can be found in the release relating to this presentation and in our periodic and other reports filed by the company with the FCC, including the company's annual report for fiscal year 'twenty.
'twenty one and then the company soon to be filed quarterly report for the quarter ended October 31st 2021.
Also some of the comments today may reference non-GAAP financial measures, such as constant currency amounts EBITDA and adjusted EBITDA.
Additional information concerning these measures, including reconciliations to the most directly comparable GAAP financial 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 Www Dot Korn ferry.
Dot com with that I'll turn the conference over to Mr. Bernstein. Please go ahead Sir.
Thank you Tom Good morning, I'm pleased to report the Korn Ferry once again achieved all time financial performance Ais revenue was up 47% and our diluted and adjusted diluted EPS were $1 38, $1.50 theory, respectively, and our adjusted EBITDA margin was 20.
One 1%.
I think our performance over recent quarters has reached a new level of scale and it speaks to the resiliency and agility of our colleagues as well as our operational excellence.
At a time of enormous transition and secular change and this aligns with our businesses today wherever and whenever strategy meets talent Korn ferry is at that cross section, enabling agility in a world that will undoubtedly be in transition for the next several years our strategy.
In the new year will be to continue to innovate replicate and scale, allowing people and organizations to exceed their potential in this rapidly changing world.
Elements of our strategy will include driving a top down and go to market strategy. There were a marquee and regional accounts, which represent about 36% of our portfolio and that's not only facilitates growth and enduring partnerships, but has also created a more scalable and durable revenues.
For example in the quarter about 30%.
Of our revenue was driven by cross referrals within our firm demonstrating the effectiveness of our go to market strategy, Although our search businesses. Both pro search in executive search combined represent about 45% of our revenue.
We believe there is still substantial market opportunity ahead, given the acceleration.
Of an increasingly nomadic labor market.
It's one of the reasons, we acquired the Lucas group during the quarter.
A move that adds breadth and depth to Korn ferry search portfolio.
Looking at our digital and consulting businesses, we will continue to innovate.
Maryann Korn ferry's capabilities with Tomorrow's opportunities for me is Jay to DNI to M&A services, and we're also going to further push the monetization of our IP and move more of our digital business to a subscription offering.
Can also scale, our learning development outsourcing or L. D O capabilities, leveraging our Korn ferry advance platform in which we now have completed 50000 development and coaching sessions and lastly, we're going to deploy a balanced capital allocation strategy, including a disciplined.
<unk> down in la.
Looking ahead I truly feel we have the strategy of the people the diversity of solutions and expertise to help our clients drive performance in this new world and our results clearly reflect this reality, we will look forward to keeping up the momentum in the new year ahead, and with that I'm joined by Bob Rozek and <unk>.
Greg devote check Bob I'll turn it over to you Greg.
Thanks, Gary and good morning, or good afternoon, depending on where you are in the world.
Let me start with a few comments before I jump into the second quarter results.
So you know I've always felt that the best way to measure success is through performance and if you look at our performance coming out of the Covid recession.
It's really been and continues to be exceptional and that's reflected in our Q2 results you know theres no doubt that the world. We live in has changed for good today.
Today more than ever our clients are facing unprecedented organizational and human capital challenges as workforces are transformed.
And digitized it.
Corporations are called upon to add greater environmental social and governance responsibilities.
The organization has strived to have work environments that are inclusive and free from bias or even as companies are challenged.
To grow in a post COVID-19 environment.
There are real secular changes, creating real and challenging business issues.
For companies across the globe.
And.
The fact that no business issue has ever been solved without the involvement of people.
And that's really where Korn ferry comes in I mean, that's our sweet spot right, our core and integrated solutions line up perfectly with the secular changes that companies across the globe are wrestling with today, whether it's finding the right talent in a dislocated labor market.
Two accelerating topline growth or even keeping employees engaged motivated appropriately rewarded and retained in this new and evolving work and social environment.
As these forces continue to shape the workplace our clients in growing numbers continue to recognize the role that our people and our solutions play in helping them solve their most pressing business issues through their most pressing the precious asset their people.
I would also say that this is not our 15 minutes of Fame I mean, these secular changes that we're all feeling are real and they are here to stay in my view I think I really believe.
We're in the first inning of a long ball game.
Now just as market demand has been strong our execution has been stronger driving our fee revenue earnings and profitability to all new all time highs.
Now I'm going to turn to Q2 results so as Gary mentioned.
Fee revenue in the second quarter grew $204 million or 47% year over year, and $54 million or 9% sequentially, reaching an all time high of $639 million.
Fee revenue growth in the quarter for our consolidated executive search business was up 59% year over year and up 9% sequentially, while our Po and professional search business was up 76% year over year and 8% sequentially.
Growth for our consulting and digital businesses was also very strong consulting grew 30% year over year and 11% sequentially.
Digital was up 18% year over year and 10% sequentially.
Turning to earnings and profitability. They also grew to new highs in the quarter. Our adjusted EBITDA grew $69 million year over year, and 13, and a half million dollars or 11% sequentially to $135 million with an adjusted EBITDA margin of <unk>.
21, 1%, both our new quarterly highs.
Our earnings and profitability continue to benefit from both higher consultant and execution staff productivity and lower G&A spend adjust.
Adjusted fully diluted earnings per share also advanced to a new high in the quarter improving to $1 53, which was up 99 cents compared to adjusted fully diluted earnings per share in the second quarter of fiscal 'twenty, one and actually up 16 or 12%.
Sequentially.
It's really interesting when you compare our business today through the first six months to the same period in fiscal year 'twenty, United the pre pandemic period.
Just two years ago, both our scale and our profitability are up dramatically.
Our firm's fee revenue for the fiscal year 'twenty to Q2 year to date period is up 25% with double digit growth in every line of business.
Our adjusted EBITDA over the same comparison period.
Is up 67%, that's nearly three times greater than fee revenue growth.
Adjusted EBITDA margin is up 530 basis points.
To nearly 21%.
Our earnings power has never been higher.
Now as I look at new business that also accelerated in the quarter, reaching new highs for each of our lines of business.
Consolidated basis, New business awards, excluding <unk> were up 40% year over year and up approximately 8% sequentially.
<unk> New business was also extremely strong with a record $136 million of total contract awards.
Consolidated record level of new business across all of our business lines in the second quarter really provides us with a very solid backlog entering the fiscal third quarter.
Our investable cash position also remains strong.
At October 31, the end of the second quarter cash and marketable securities totaled $997 million now when you exclude amounts reserved for deferred compensation arrangements and accrued bonuses, our global investable cash balance at the end of the second quarter was approximately 500.
And $91 million, and that's up about $133 million or 29%.
Year over year. It should be noted that this investable cash position includes approximately $90 million that was used to acquire the Lucas group on November one.
We continue to take a balanced approach to allocation of capital. In addition to the Lucas group and investing in the hiring of additional fee earners.
And execution staff.
Year to date, we have repurchased approximately $14 million of our stock and have paid cash dividends of approximately $14 million as well.
With excuse me with that I'll turn the call over to Greg to review, our operating segments in more detail.
Bob I'm going to start with KF digital.
Global fee revenue for KF digital was $88 $6 million in the second quarter, which was up 18% year over year and up 10% sequentially.
Subscription and licensing component of KF digital fee revenue grew to $26 million in the second quarter, which was up 16% year over year and up 7% sequentially.
Additionally, global new business for KF digital in the second quarter grew 29% year over year to a new high of $114 million with $44 million or 39% related to subscription and license services.
Earnings and profitability also continued to grow for KF digital in the second quarter with adjusted EBITDA of $28 $6 million and a 32, 2% adjusted EBITDA margin.
Now turning to consulting.
In the second quarter consulting generated $164 $9 million of fee revenue, which was up approximately $38 million or 30% year over year and $16 million or 11% sequentially.
Fee revenue growth continued to be broad based across all solution areas and strongest regionally in North America, which was up over 43% year over year.
Consulting new business also reached a record high in the second quarter growing approximately 17% year over year and 2% sequentially.
Regionally new business growth was also broad based in the second quarter with continued strength in North America, and improving trends in EMEA and APAC.
Adjusted EBITDA for consulting in the second quarter improved to $31 million.
With an adjusted EBITDA margin of 18, 2%.
Growth for RPM professional search continued to improve in the second quarter.
Globally fee revenue grew to $154 million, which was up 76% year over year and up approximately $11 million or 8% sequentially.
Both RPM professional search continued to take advantage of post recession dislocations in the labor market for skilled professionals.
<unk> revenue grew approximately 69% year over year, and 10% sequentially, while professional search fee revenue was up approximately 88% year over year and 5% sequentially.
Sequentially, both the number of new search assignments and the average fee per assignment were up double digits for professional search.
New business wins for both RPM professional search were also extremely strong in the second quarter, reaching new all time highs.
<unk> search new business was up 13% sequentially and <unk> was awarded a record $136 million of new contracts, consisting of $28 million of renewals and extensions.
$108 million of new logo work.
Adjusted EBITDA for RPM and professional search continued to scale with revenue improving to $36 $3 million with an adjusted EBITDA margin of 24, 1%.
Finally in the second quarter global fee revenue for executive search reached another new all time high of $235 million, which was up 59% year over year and up 9% sequentially.
Growth was also broad based and led by North America, which grew 74% year over year and over 14% sequentially.
Fee revenue in our international regions remained steady in the second quarter, EMEA and APAC were up approximately 34% and 36% respectively measured year over year and essentially flat sequentially.
We continue to invest in expanding our team of consultants in the second quarter. The total number of dedicated executive search consultants worldwide at the end of the second quarter was 570 up 58 year over year and up 5% sequentially.
Annualized fee revenue production per consultant in the second quarter improved.
To a record $1 $66 million.
And the number of new search assignments opened worldwide in the second quarter was up 37% year over year, and 5% sequentially to a new all time high of 1830.
And the second quarter Global Executive search adjusted EBITDA grew to approximately $66 million, which was up $38 million year over year, and up $4 5 million or 7% sequentially.
Adjusted EBITDA margin in the second quarter was 28, 1%.
As I turn the call back over to Bob to discuss our outlook for the third quarter of fiscal 'twenty two great. Thanks, Greg as I mentioned earlier, new business in the second quarter grew to.
A new all time high.
And it actually accelerated each consecutive month in the quarter net positions us with a very strong backlog entering our third fiscal quarter.
In fact, as we ended the quarter October and September where our first and second highest new business months ever.
While our third quarter is usually our most seasonal quarter as both our clients and colleagues take time off during the year end holiday season. However in November was also an excellent month for new business actually.
Clip seeing September is the second highest months ever and that was up 37% year over year now its monthly trends in each of our lines of business are consistent with our historical patterns and the market conditions remained strong we would expect December to be seasonally slower than November.
With demand accelerating and peaking at a quarter high.
In January <unk>.
Additionally, we will continue to make investments and consultants and execution staff.
To fuel future growth and we expect employee productivity to remains strong in G&A spend to remain at current levels in the third quarter, keeping both earnings and profitability is strong.
Now assuming no new major pandemic related lockdowns are changes in worldwide economic conditions financial markets and foreign exchange rates.
And including fee from the Lucas Group, we expect our consolidated fee revenue in the third quarter of fiscal 'twenty two to range from $640 million to $660 million and our consolidated adjusted diluted earnings per share to arrange.
From $1 42 to $1 58, while our GAAP diluted earnings per share should range from $1 38 to $1 56.
As we look ahead to the new year, we see a great opportunity to continue to build on our strong financial performance.
Based on the strength.
The continuing strength of our new business trends.
It is evident to us that our portfolio of solutions will have a continuing relevance as companies address the secular changes I previously discussed.
We will continue to execute at a high level and there is little doubt that we are well positioned to take more than our fair share of the growing market.
Korn ferry has never been better positioned to serve all of its constituencies colleagues clients candidates and shareholders for years to come.
With that we would be glad to answer any questions you may have.
Ladies and gentlemen on the phone lines. If you wish to ask a question today. Please press one followed by the zero and you're going to hear acknowledgment that you've been placed acuity can take yourself out of the queue by simply pressing the one zero command again.
Then for questions. Please press one zero at this time.
Our first question today will come from the line of Tobey Sommer, representing Trust Securities. Please go ahead.
Thank you very much.
If you could comment about.
The benefits of building out your professional search capabilities and if you could.
Continue to add to it.
Is there anything in the marketplace.
In terms of having a bigger established brand in the marketplace that could help because I think thats a relatively fragmented market. Thank you.
It is it's a very very fragmented market.
Say, it's a sizable market and.
Against the backdrop.
Of a nomadic labor market.
Where people.
Work at a company for a year or two and move on and Upskill and parlay salary and benefits.
We really see an incredible opportunity and the brand of Korn ferry.
<unk> is very very powerful.
And we think that that combination along with our IP.
And our people.
Create a sizable opportunity for Korn ferry in today on a run rate basis that professional search piece of our <unk> and PFS businesses, it's probably running about $350 million and we easily.
See that as a $1 billion business for us. So we're going to continue to invest in all of our search businesses.
And in particular professional search and that could also include interim interim work and possibly even high level staffing as well.
Okay.
Tobey.
The other thing I would add to that is the.
Access that our search folks provide to us.
And we've seen it in each of the acquisitions that we've done.
Elevates, our ability to perform as well.
Because the companies that we're acquiring just simply don't have the access that.
Our folks do.
Okay.
Yeah, that's right that's a very very good point, Bob because when you look at the when you look at the cross referrals in the quarter on a dollar basis. It was an all time high and out of the $640 million or so of revenue about $173 million of that were up.
Presented cross referrals and those are real dollars that our colleagues get paid off.
For cross, referring business and when you look at our <unk> and PFS business.
That's typically 40% 50% of the revenue in any given quarter is actually referred from inside the network. So that's an excellent point Bob.
Could you talk a bit about inflation both in terms of how it helps your topline across your different businesses as well as what youre seeing internally in your needs.
Kind of a stay competitive with internal compensation as well.
Yes, it's certainly unlike anything I've ever seen.
When you look at the the the.
The transient nature of many companies workforce Workforces today then.
And then the outlook of younger people entering the workforce. It's just it's night and day from when I started years ago.
Lately different perspective, if you look at our.
Take our average fees for example on professional search Theyre, probably up 18, 19% over the last four or five quarters on the executive search side. They are also up probably.
<unk> 13, 14% something like that and I think that reflects what youre seeing in the market today around inflation and wage pressure.
We've also raised prices.
Across the board, whether it's our consulting business or digital businesses.
To increase.
Our price points.
And internally for our colleagues. We've also I mean, the amount of raises that we've given over the last 12 months is three times higher than we've ever done. So I think that we're taking a balanced approach to making sure that we are being rewarded for the value that we deliver to clients.
And also.
Passing that on to not only our shareholders, but as importantly, our colleagues.
Last one for me if you could comment on what the continued acquisition pipeline looks like so that.
You were able to deploy.
Your ample balance sheet.
Those to return.
Yeah, that's a good question.
We certainly have a big.
Towards the professional search market.
It's something that as you asked the question it's opportunity it's a fragmented market.
Korn Ferry brand is phenomenal and so we continue as we have to to look at ways that we can grow that that business will Lucas group.
As a as a company that IMS, probably 15 or 16 years ago.
And it's one that we have periodically stayed in contact with and we're thrilled.
To make that investment and have those colleagues now now join the.
Korn ferry and so I think that.
Given our legacy professional search business, we had combined with.
With the powerful platform of the Lucas group, it's really a solid foundation.
To grow that business. So that's that's clearly one.
The second is I do believe that there is an opportunity to create an <unk> business here.
Much like we did with <unk> years ago.
When you look at again, the Mega trends in the World and you look at increasing level of turnovers at companies.
You can you can maybe partially.
All of that through compensation, but that's really not the answer.
People want to grow they want to be develop they want to be stimulated they want to know that what they do matters to another human being in and out.
I think the development whether thats coaching.
That can go a long way too I think.
Reducing turnover and that makes that makes a huge impact on the company's P&L. There's this hidden cost on every income statement.
I'll turn it over so we see.
With our IP that we have.
And just a phenomenal opportunity to to replicate what we did with RP.
Do it in the learning space. So those two areas certainly come screaming off the page and then we're also looking at that.
At other areas, such as such as our consulting business or digital businesses. So.
We're going to.
<unk> had a very systematic approach to M&A and we're going to continue that.
Thank you.
Next we'll go to line of Tim Mulrooney, representing William Blair. Please go ahead Sir.
Yes, good morning, everybody. Thanks for taking my questions.
You were helpful in sharing with US what percentage of your professional search clients or I guess, what percentage of your professional search business is referred from the executive search business. I was wondering if you could also comment on how many executive search clients don't currently use professional search services, but could bear.
From them.
So a huge amount I mean, I don't have the data.
Front of me, but it's enormous and it is not saturated.
No no.
No no no.
Not even not even close and so.
Okay. The opportunities there so how do you go about that well.
The first answer to that is through our marquee and regional accounts driving loyal sustaining clients of scale and today, we have about 315 marquee and regional accounts that represents about 36% of the portfolio and that would be the first lever that we pull but no there is no.
It is far from saturated in terms of the penetration there.
Alright, well that's helpful.
Did Lucas group did that include some temp staffing as well as like two thirds professionally it deserves it.
Is that so you guys would look at it.
Staffing on a <unk>.
Tractive spot right now all the companies are up a lot its very very busy there's a dislocation there too is that something you guys would look look into getting getting further involvement.
Absolutely Yeah, we do believe there's an opportunity there again.
This.
Nomadic labor market.
For sure and I think that.
Coming through this pandemic and now not only digitizing everything but work anywhere anytime.
That is going to play very very well.
That trend so yes, we did pick up.
A very good base of interim staffing business and we're going to continue to.
To drive that which is which is new for Korn ferry I mean, both of these areas really I mean, we've been in the professional search business for years, but.
But both of these areas.
Really speak to a new opportunity for our firm.
Yeah, that's interesting I wasn't sure how youre going to answer that.
That makes perfect sense.
Just one more from me you know within your your executive search business, both pro and executive.
I guess within your search business as both of them I was hoping you could talk a little more detail about how the volumes trended through your fiscal second quarter here I mean did they.
Essentially do they continue to accelerate month over month throughout the quarter or was there a little more choppiness in those numbers.
Bob do you want to.
Yes, I'll take that.
And the volumes.
In line with our overall new business did.
Did accelerate.
Throughout the quarter and actually continued in the month of November the month of November is in terms of the search volumes. It was our highest.
This volume in terms of units.
That we've ever had.
So no we continue to see great.
Great volumes right low levels of searches being won by by our folks.
Okay, Alright, that's very helpful. Thanks for taking my questions guys.
We will go to line of George Tong with Goldman Sachs. Please go ahead Sir.
Mr. Tom you touched on continued traction with your marquee and regional accounts. This quarter can you elaborate on broader cross selling activity. Among these larger accounts.
How much opportunity remains as well as what that means for potential market share performance.
Well the.
<unk> regional accounts represented about 36% of the portfolio. If you look at World class professional services firms.
Like ours, you you would find that that that number on an <unk> quote house accounts would be 40% could be as high as 45%.
We continue to have that as our first strategic lever.
The performance of those accounts outperformed the portfolio again.
Then in terms of the cross referrals.
This was the highest dollar amount.
Cross referrals that we've had.
In a quarter end.
Like I said earlier those are real numbers our colleagues.
Are rewarded.
Both on the spot on an ongoing basis as well as when we evaluate end of the year performance. So.
Both of those aspects of our strategy.
We're walking definitely walking the talk.
Yes.
George This is Bob I would also add when you look at the opportunity there I mean, as we think about.
The cross line of business referrals.
To be excellent in that area, if you're achieving a 35% to 40%.
<unk>.
And you're really hitting your sweet spot.
I look at what we've done over time go back to FY 18, we were at 14%.
Year to date.
At 28, a little bit north of 28%. So obviously, we've grown that nicely and theres still.
To get to 40%, there's still ample opportunity.
For us to grow the cross line of business referrals. The only thing I would add as well is if you look at what I find really encouraging and a lot of the referral activity historically had gone from executive search two the other lines of business.
Again going back to FY 2018, the referrals into executive search were only three 6%.
Today, it's closer to 10%.
So again, we're making great progress there in terms of the sort of cross fertilization across all lines of business.
Got it that's helpful. You've continued to deliver significant EBITDA margin expansion in the current environment. How are you thinking about the long term structural margin opportunity at Korn ferry and how has the pandemic changed your overall underlying cost profile.
Gary you want me to jump on.
Yeah, Yeah, Yeah, So George I think.
The last couple of calls we had talked about some of the key drivers to the structural change whether that was how we.
We enabled the execution of our services, our BD kind of internal meetings travel.
And our real estate.
And we said that we felt it was a 200 basis point improvement. So historically, we talked about a 15% to 16% sort of long term range that we bumped it up to 17 to 18.
We've got sort of three quarters under our belt.
We actually think that is closer to 18% to 19% in terms of the structural changes you saw in the quarter, we took a charge for.
Our real estate strategy.
Where we are today on that we've reduced about 20% of our overall footprint.
We still have some little bit of work to do there and my guess is by the time the dust settles it'll be down probably 25% plus minus.
And so that'll be obviously permanent store.
Structural change that we have on the BD.
<unk> internal meetings, we were doing $11 million a quarter.
Think going forward.
We were at one over the past couple of quarters, one to two that will probably.
Settle in right around five five and a half.
So again permanent structural change.
I think just the scaling of the business and the productivity of our folks driven by the ability to work virtually.
That's going to be permanent structural change in fact, one of the things I do prefer every every quarterly call that reach out.
To partners in the firm and I was talking to a couple of search partners last week and they were commenting on the fact that they believe theyre going to be able to conduct more searches.
<unk> time to searches as faster so.
So I think the impact of working virtually.
Is going to be again more more structural change and that's why we've elevated our long term sort of EBITDA margin outlook to 18, and 19% and then given where our top line goes.
Digital achieved what we expected to achieve.
There could be upward pressure on <unk>.
18% to 19%.
Got it very helpful. Thank you.
Sure.
And next we'll go to the line of Mark Marcon with Baird. Please go ahead.
Okay.
Hey, guys good.
Good afternoon, everybody and congratulations on the great quarter.
I'm wondering Gary I wanted to just start on a on a big topic.
If you get more into.
Temporary staffing.
It has a certain market perception and Korn ferry has.
Elevated.
Market perception related to executive search and consulting alright could you frame a little bit about how you're thinking about the types of <unk>.
Temporary staffing that you could potentially get into and how you would protect.
The franchise and the brand name.
Well Youre absolutely right.
Number one it starts with the quality.
Of delivery.
But we would be definitely focused on the more higher end.
Of that marketplace.
We would not see ourselves going.
I hate to use this term but.
Down market.
We would not be doing that.
We would certainly be focused on skill.
Skilled positions.
And probably around it you know.
Three or four functional areas.
Shell's legal such as finance and accounting such as certain aspects of technology, but we would stay.
As you indicated at the higher end for sure no question about that.
Great.
Can you talk a little bit about Lucas group I mean, obviously there was just completed on November 1st but.
And so early but what's the initial reaction and what's embedded in terms of the guidance in terms of their contribution and what how should we think about that.
The annualized run rate.
About $100 million a.
A year without taking into account the growth.
Gross synergies.
So call it today $25 million a quarter.
I had indicated its a company that I met with I met with art Lukas, probably 16 years ago and was always enamored by their the brand that they have in the marketplace. They started more on the military side and over the years have have evolved into technology.
Our finance and accounting legal supply chain Tech.
Technology, and so it's a very very balanced portfolio and it really <unk>.
<unk> to the handful of functional areas.
Korn Ferry would would have an interest in.
On an earlier question part of their business less than 50%, but part of their business is around.
Interim placement, which will also.
Attracted to and in terms of the.
The success, so far we're only one month into this and we've already seen.
Some very very nice wins and.
Including a couple wins actually for our executive search colleagues that came from the Lucas group and I can think of one that was very very sizable for Korn ferry say two 5% to three times the size of our average fee. So it's.
We're off to the right start for sure.
I think they've got just fantastic people.
And I think this is at the beginning I think with Lucas group and our pro search business.
And the reaction inside the firm has been incredibly positive and all of the.
The physical meet and greets that we've done so far.
Very very well and more importantly, we've seen wins in the marketplace and I think that hopefully that Lucas group colleagues feel like they're part of the Korn Ferry family.
That's great.
Gary.
Both gone through multiple cycles.
How are you thinking about.
Oh gosh I completely agree with you with regards to Hey, we've got number of behavioral changes.
We can observe and Scott the baby boomers that are retiring.
But.
Obviously, there is also there.
Also from some peak ish type behavior out there as well. So how are you thinking about it just in terms of where you think we are and then.
How are you thinking about the capital deployment, because you obviously have the capital to deploy.
So how careful would you be.
Page.
Yes, we're certainly not going to we certainly wouldn't reach.
That's for sure.
I can.
Speak to somebody that I know very well, who is graduating from college, who hasn't even started.
And she is going to work for a professional services firm.
In the summer and has already seen two raises before she has even started so.
It's a market that.
Is unlike anything I've seen I mean, the big Wildcards inflation.
Now that could be the real that could be the real killer.
And it is definitely not transitory, it's certainly widespread.
So that is.
That is probably the biggest risk next next to any geopolitical risk.
We haven't seen anything in terms of this new mutation in terms of an impact on the new business.
It could but I would.
I would say that yeah.
<unk> people coming out.
College today have just a completely different outlook on opportunity and careers.
But I certainly did not have.
And I think that that pneumatic label market.
Spells opportunity for Korn ferry yet at the same time, you're right. We've seen a number of different cycles and I'll tell you just going back two years.
<unk>.
19, if you would've told me that there was going to be a global pandemic and we would have lost so many lives and so many people would be inflicted by this common enemy.
Society, we'd go through all of this in our business, we would furlough employees, we'd ask people to take pay cuts in.
We would repay all of those pay cuts we would hire back substantially all of those employees in our business would be 30% higher.
Who would have guessed that.
So it's certainly hard to predict the future, but I think inflation is probably the biggest question that's out there.
And obviously you are able to more than pass along.
All of that.
Yes, we're certainly.
Fortunately or unfortunately.
We're doing that and you just look at the look at the data in the professors professional search and executive search business in terms of the average fees I mean, it's absolutely reflective.
Of not only the strategy, but clearly it's reflective of the inflationary environment. We're in.
That's great.
Can you talk a little bit about the <unk>.
Apache City, I mean, obviously business is booming.
How stretched you currently feel.
How should we think about internal ads and deploying capital to to recruit more people organically.
Well, we're going to continue to deploy capital to recruit people.
On on all aspects of our business.
We've probably never been as aggressive as we are right now so we're going to we're going to continue to do that I think we've got a good track record of bringing new colleagues in an on boarding them.
So we're going to we're going to absolutely continue that in terms of our colleague count we're actually a little bit higher than we were pre pandemic.
No.
I think that we've gotten the right balance there in terms of our.
Capability clearly.
The the.
Ability to execute on engagements.
Just like we're looking for fee earners, we're certainly continue to add execution resources.
Our turnover.
Is substantially less.
Then what I would consider a world class professional services firm to help so.
I'm not going to disclose it but our turnover right now.
So far this year is only 200 basis points higher.
Than it was.
Before the pandemic so.
That's good news as well that's great and then with regards to consulting and specifically digital could you talk a little bit about some of the new wins and what you're most excited about and what what.
What is what seems really promising.
Well.
I think we have unlimited IP and the question is can we take that IP and configure it.
To improve and organizations retention of their people and whether that's.
Retaining people another year six months two years it has an enormous impact so.
That's absolutely our intent.
And I can think of an engagement that I very very recently.
Major technology.
Company, where.
It's an eight figure eight figure engagement, that's principally digital.
Where are their license our IP.
To improve their effectiveness.
So in.
And that came about that in part came about because of our marquee and regional account strategy. It came about because of an acquisition that we did.
Before the pandemic.
So I think thats pretty indicative of what we can what we can do there and I think the the other area is this LVL.
LDL capability and to take our IP.
And to license out the companies to develop their people through the KF advance platform.
We've done 50000.
Individual.
Coaching and development sessions, so what started out as a BDC business actually has turned out to be an incredible technology platform, coupled with our IP companies can use to develop their people.
Pretty cost effective way.
That's great.
Eight figure deal that you have with that specific company is pretty exciting do you see others that could be like that coming in the near future.
Well you know look that's.
That's a huge win it's we do have a good pipeline.
And.
We'll see I think that our IP is second to none I mean, if you look at it.
The amount will develop a million professionals a year, we've done 70 million assessments, we have incredible learning journey, whether those are anchored around the eni or ESG I mean, it's.
It's pretty robust and.
You know I think part of it comes down to Ceos will they will they recognize that theres other ways than just money.
To keep people engaged and I think at a time, where.
People are going to be increasing increasingly pneumatic the real risk for companies is it in this hybrid world, but that employees become kind of free agents and.
It's it's hard to leave other people, it's easy to leave companies, but it's harder to leave other people in the risk is in this hybrid world are people are going to become.
Are they going to feel increasingly like their free agents and there is no loyalty to our brand to a company and there are ways that the Ceos, Ken can address that and it's not just money.
And I think that potentially using.
Using our IP using Korn, ferry's IP, whether that's through coaching or whatever.
Is one way that can have an impact on turnover.
And Mark this is Bob just so it's clear.
The engagement Gary was talking about actually is going to be a subscription solo.
The figures will be realized over three years.
Yes, I know about that one.
Yes.
And then the.
LDL ones that Gary was talking about those are those are also a figure engagements that are going to be realized over.
Two three or four years.
Great and lastly, just on the on the RP O New business signings, you mentioned, a number of new logos, where those new logos.
Former arpino users or are they brand new to RPI.
I don't have the exact split on that Mark, but my guess is it's probably in the kind of 50 50 range, where we're stepping in.
And roughly half of them and taking over from another provider.
Then the other half is just there is what we're seeing in the marketplace is a growing acceptance.
Of of handing over your talent acquisition activities to an outsource provider.
That's great. Thank you.
Correct.
And gentlemen, there are no further questions at this time.
Okay, well listen thank you everybody I I see.
Sincerely wish everybody, a Merry Christmas happy Hanukkah happy holidays.
And.
We look forward to speaking to you in the new year. Thank you very much bye bye.
And ladies and gentlemen, this conference will be available for replay starting this afternoon at four P M Eastern and running through December 14th at Midnight, you May access the AT&T executive playback service at anytime by dialing 8662071041.
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Seven and I use that same access code of four to 580 770 <unk> III.
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Gary.
One moment they disconnected.
Okay, all right, we're going to hang up till then thank you.
Tom.
Thanks, So much have a great day gentlemen, thank you bye.
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