Q1 2024 Korn Ferry Earnings Call

Entirely please continue to hold.

Ladies and gentlemen, thank you for standing by and welcome to the Korn Ferry first quarter fiscal year 2024 conference call. At this time all participants are in a listen only mode. Following their progress.

Paired 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 final financial presentation that we will be reviewing with you today.

Before I turn the call over to your host Mr. Gary Bernsen, Let me first read either a cautionary statement to investors.

Certain statements made on the call today, such as those relating to future performance plans and goals constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, although the company believes the expectations reflected in such forward looking statements are based on reasonable assumptions investors are cautioned.

It's not to place undue reliance on such statements.

Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties, which are beyond the company's control.

Additional information Kearney concerning such res six risks and uncertainties can be found in the release relating to this presentation and in the periodic and other reports filed by the company with the S. E C, including the company's annual report for fiscal year, 'twenty 23, and the company soon to be filed quarterly report for the quarter ended.

Your life 31, 2020 three.

Also some of the comments today may reference non-GAAP financial measures such as constant constant currency I'm on 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.

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 call over to Mr. Bernstein. Please go ahead Mr Bernstein.

Okay. Thank you, Greg and good afternoon, everybody and thanks for joining us our team is going to get into the numbers.

Second, but I first wanted to say how.

How incredibly proud I am.

Proud of our firm of our colleagues.

And you know our diversification strategy.

<unk> is the right one I mean it continues to positively.

Influence our results I would point out that clearly the market demand for Perm placement.

And acquisition has softened from post pandemic highs, but the rest of the portfolio has performed absolutely as designed and are consulting and digital businesses.

Have never been more meaningful, especially when you think about tomorrow's economy, when there's going to be continued demographic shortages skilled chefs are all over the globe.

I really you know as I step back and tap Google Earth I think much of the business World is.

And it is in the midst of a multi quarter cyclical reset.

Not only in how we work, but also adapting to an interest rate environment that we haven't seen in almost two decades.

This transitory period is going to bring about I think significant change and more importantly opportunity for Korn ferry and we're going to seize that opportunity.

With a three point strategy number one optimize to innovate.

And three consolidated and Bob's going to get into that a little bit more in his remarks.

I would just conclude by saying you know, while we're certainly not where we used to be.

Your conference will begin momentarily. Please continue to hold.

We're definitely on the road to where we wanted to be the firm that enables people and organizations to be more of that.

Bob I'll turn it over to you.

Great. Thanks, Gary and good afternoon, or good morning, depending on where you are calling in from.

Operator: Ladies and gentlemen, thank you for standing by and welcome to the Korn-Ferry first quarter fiscal year 2024 conference call. At this time, all participants are in a listen-only mode. Following their 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 KornFerry.com, a copy of the financial presentation that we will be reviewing with you today.

Listen I Echo Gary's comments and that we're pleased with the results from the first quarter of the fiscal year as our earnings and profitability remained sequentially stable. Despite.

The challenging macroeconomic backdrop as well as a seasonally slower fee revenue quarter.

As I step back and put the quarter in context I'm also pleased that our results are a clear demonstration that we continue to successfully execute our strategy. We built a company with a portfolio of core and integrated human capital solutions that are both highly relevant in the world today as well as synergistic with rich.

Operator: Before I turn the call over to your host, Mr. Gary Burnison, 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 Security's litigation reform act of 1995. Although the company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, investors are cautious not to place undue reliance on such statements.

Back to top line.

So in an environment, where other employment services companies are seeing downward pressure on their top line.

We've executed our strategy our fee revenue was essentially flat year over year as client demand around solutions, such as workforce transformation assessment succession interim contract labor.

Operator: Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties which are beyond the company's control. Additional information concerning such risks and uncertainties can be found in the release relating to this presentation and in the periodic and other reports filed by the company with the SEC, including the company's annual report for fiscal year 2023. And the company soon to be filed quarterly report for the quarter ended July 31st, 2023.

<unk> set the expected moderation in permanent placement talent acquisition.

No you heard Gary speak about our strategic focus going forward.

<unk> innovate and consolidate.

So let me start with optimized first and where we are going to continue to drive productivity by leveraging our cost base in fact, if you take.

Q1 of FY, 'twenty, four and compare that to Q3 of FY 'twenty, that's the quarter right before the pandemic our fee revenue per employee is up 18%.

Operator: Also some of the comments today may reference non-gap financial measures such as constant currency amount, EBITDA and adjusted EBITDA. Additional information concerning these measures, including reconciliations to the most directly comparable gap 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.cornferry.com.

We will also continue to pursue opportunities in faster growing economies.

With governments that are driving economic infrastructure and human capital initiatives with our marquee and regional accounts and with our cross line of business referrals.

Let me turn to innovate we will be at the forefront of talent and organizational data ensuring that our IP is fit for purpose for the foreseeable future.

Operator: With that, I'll turn the call over to Mr. Bernison. Please go ahead, Mr. Bernison.

Gary Burnison: Okay, thank you, Greg, and good afternoon, everybody, and thanks for joining us. Our team is going to get into the numbers in a second, but I first wanted to say how incredibly proud I am. I'm proud of our firm, of our colleagues, and our diversification strategy is the right one. I mean, it continues to positively influence our results. I would point out that clearly the market demand for firm placement, talent acquisition is softened from post-pidemic highs, but the rest of the portfolio has performed absolutely as designed.

We're going to continue to leverage new technologies as they emerge such as generative AI to drive greater client impact will continue with our investment to monetize monetize our intellectual property through our digital business.

And increase our emphasis and investment in our expansive and proprietary data.

Last I'll touch upon consolidate where our efforts are going to be focused on continuing our investment in strategically aligned less cyclical faster growing and larger addressable markets.

We're going to continue to focus on building out a global executive and professional interim business.

Gary Burnison: I mean, our consulting and digital businesses have never been more meaningful, especially when you think about tomorrow's economy. When there's going to be continued demographic shortages, skillships, all over the globe. I really, you know, as I step back and tap Google Earth, I think much of the business world is in the midst of a multi-quarter cyclical reset, not only in how we work but also adapting to an interest rate environment that we haven't seen in almost two decades.

Expanding our business in leadership and professional development as well as our capabilities in leadership development outsourcing and we will continue to explore opportunities in strategic and operational consulting.

Now with that let me turn the call over to Greg It was going to take you through some of the overall company financial highlights.

Thanks, Bob in the first quarter global fee revenue was $699 million flat year over year at actual foreign exchange rates and at constant currency.

Fee revenue continued to moderate from post pandemic highs in our permanent placement talent acquisition businesses and was offset by stable revenue for both consulting and digital and revenue from our recent investments in interim services.

Gary Burnison: This transitory period is going to bring about, I think, significant change and more importantly opportunity for Korn, Ferry, and we're going to seize that opportunity with a three point strategy. Number one, optimize to innovate in three, consolidate, and Bob's going to get into that a little bit more in his remarks. And I would just conclude by saying, you know, while we're certainly not where we used to be, we're definitely on the road to where we want to do. The firm that enables people and organizations to be more than.

By line of business measured year over year at constant currency <unk> revenue was down 12% for executive search down 21% for professional search permanent placement and down 16% for RPM.

In contrast fee revenue growth measured year over year at constant currency was up 1% for consulting up 5% for digital and aided by our recent acquisitions of Ics and say low fee revenue for interim services was up $59 million.

Gary Burnison: Bob, I'll turn it over to you.

Bob Rozek: Great, thanks Gary and good afternoon or good morning, depending on where you're calling in from. Listen, I echo Gary's comments and that we're pleased with the results from the first quarter of the fiscal year. As art earnings and profitability remains sequentially stable despite, you know, the challenging macroeconomic backdrop as well as a seasonably slower fee revenue quarter. As I step back and put the quarter in context, I'm also pleased that our results are a clear demonstration that we continue to successfully execute our strategy.

Consolidated new business in the first quarter, excluding Rps was up 1% year over year at actual rates and up 2% at constant currency.

Consistent with fee revenue new business in the first quarter moderated most in executive search and permanent placement professional search.

Earnings and profitability measured year over year also moderated in the first quarter.

Adjusted EBITDA in the first quarter was $96 million with an adjusted EBITDA margin of 13, 7%.

Bob Rozek: You know, we built a company with a portfolio of core and integrated human capital solutions that are both highly relevant in the world today, as well as synergistic with respect to top line. You know, in an environment where other employment services companies are seeing downward pressure on their top line, you know, as we've executed our strategy, our fee revenue was essentially flat year over year. As client demand around solutions such as workforce transformation, assessment and succession, interim contract labor, offset the expected moderation in permanent placement talent acquisition. Now you heard Gary speak about our strategic focus going forward, optimize, innovate and consolidate.

Consistent with recent quarters earnings and profitability in the first quarter were impacted by the mixed shift and fee revenue by line of business.

Investment in head count to preserve be generating and execution capacity.

And product development initiatives, specifically for digital.

Additionally, it should also be noted that adjusted EBITDA in the first quarter was essentially flat.

Sequentially with a 30 basis point improvement in margin driven primarily by cost control measures implemented over the last two quarters.

Finally, our adjusted fully diluted earnings per share in the first quarter or <unk> 99.

Bob Rozek: So let me start with optimize first. And we are going to continue to drive productivity by leveraging our cost base. In fact, if you take Q1 of FY24 and compare that to Q3 of FY20, that's the quarter right before the pandemic. Our fee revenue per employee is up 18%. We will also continue to pursue opportunities in faster growing economies with governments that are driving economic infrastructure and human capital initiatives with our marquee and regional accounts and with our cross line of business referrals.

Down 51.

Our 34% year over year adjusted.

Adjusted fully diluted earnings per share exclude approximately $6 million or <unk> <unk> per share of restructuring integration and acquisition costs, primarily related to our acquisitions as well as an incremental reduction in our real estate footprint.

Our investable cash position at the end of the first quarter was $481 million.

In the first quarter, we deployed $34 million of cash.

Four four share repurchases eight for dividends.

13 for capital expenditures and nine for debt service now.

Bob Rozek: Now let me turn to innovate. We will be at the forefront of talent in organizational data, ensuring that our IP is fit for purpose for the first feasible future. We're going to continue to leverage new technologies as they emerge such as generative AI to drive greater client impact will continue with our investment to monetize our intellectual property through our digital business. And increase our emphasis and investment in our expansive and proprietary data.

Now I'll turn the call over to Tiffany to review, our operating segments in more detail.

Thanks, Greg.

With capital Global fee revenue in the first quarter was $88 million, which was up 5% year over year at actual and constant currency digital subscription and license fee revenue in the first quarter with $33 million, which was approximately 37% of fee revenue for the quarter.

The increase was primarily due to the continued execution of our strategy to move from point of sale solution to longer term subscription and license sales.

Bob Rozek: Last I'll touch upon consolidate where our efforts are going to be focused on continuing our investment in strategically aligned, less cyclical, faster growing and larger addressable markets. We're going to continue to focus on building out a global, executive and professional interim business, expanding our business in leadership and professional development, as well as our capabilities in leadership development outsourcing. And we'll continue to explore opportunities in strategic and operational consulting.

And also an increase in assessment tool as the technology industry begin investing again with a focus on leadership development.

Global knee business, KF digital with $93 million with $32 million or <unk>, 34% of the total tied to subscription and license sales.

Our consulting fee revenue in the first quarter was $168 million, which was up approximately 1% at both actual and constant currency.

Gregg Kvochak: Now with that, let me turn the call over to Gregg who's going to take you through some of the overall company financial highlights. Thanks, Bob. In the first quarter, global free revenue was $699 million flat year-over-year at actual foreign exchange rates and at constant currency. Free revenue continued to moderate from post-pandemic highs in our permanent placement talent acquisition businesses and was offset by stable revenue for both consulting and digital and revenue from our recent investments in interim services.

Revenue growth was strongest in assessment and succession, which increased 10% year over year.

Average hourly bill rates continue to climb now close to $400 an hour, which is up over $30 an hour from just one year ago.

Additionally, global new business for consulting in the first quarter was up 7% year over year at constant currency with double digit growth in EMEA and Latin America.

The professional search and interim business increased 29% at constant currency in the first quarter versus last year, driven by double digit strength in North America and aided by the current year acquisition.

Gregg Kvochak: By line of business measured year-over-year at constant currency, free revenue was down 12% for executive search, down 21% for professional search permanent placement, and down 16% for RPO. In contrast, free revenue growth measured year-over-year at constant currency was up 1% for consulting, up 5% for digital, and aided by our recent acquisitions of ICS and Salo, free revenue for interim services was up $59 million. Consolidated new business in the first quarter, excluding RPO was up 1% year-over-year at actual rate and up 2% at constant currency.

Total fee revenue was $142 million up $43 million or 44% over the same time period breaking.

Breaking down the quarter growth in the interim business was more than enough to offset moderation and the permanent placement portion of this segment.

Interim services fee revenue grew to $84 million from $25 million in the same quarter of the prior year driven primarily by the recent acquisitions.

Imminent placement fee revenue declined by.

By $16 million to $58 million year over year down, 22% at actual and down 21% at constant currency moves.

Moving on to recruitment process outsourcing new business for the first quarter was $48 million and total revenue under contract at the end of the quarter was approximately $680 million.

Gregg Kvochak: Consistent with free revenue, new business in the first quarter moderated most in executive search and permanent placement professional search. Earnings and profitability measured year-over-year also moderated in the first quarter. Adjusted EBITDA on the first quarter was $96 million with an adjusted EBITDA margin of 13.7%. Consistent with recent quarters, earnings and profitability in the first quarter were impacted by the mixed shift in fee revenue by line of business. Investment in headcount to preserve, be generating and execution capacity and product development initiatives specifically for digital.

Fee revenue totaled $96 million, which was down $18 million or 16% year over year and down approximately 16% at constant currency.

Fee revenue was impacted by a moderation in hiring volume in the base and backlog.

We see this slowdown as transitory and believe <unk> is well positioned to benefit when hiring returned to more normalized levels in the base and the larger more recent wins begin converting to fee revenue.

Although the quarterly new business can be choppy at times. The pipeline remains strong as <unk> continues to win new business. The differentiated service offering in the marketplace, which includes our new data driven recruiting technology nimble that uses that draws upon our unique data IP and talent management expertise.

Gregg Kvochak: Additionally, it should also be noted that adjusted EBITDA on the first quarter was essentially flat sequentially with a 30 basis point improvement in margin driven primarily by cost control measures implemented over the last two quarters. Finally, our adjusted fully diluted earnings per share in the first quarter were 99 cents down 51 cents or 34% year-over-year. Adjusted fully diluted earnings per share exclude approximately $6 million or 10 cents per share of restructuring integration and acquisition costs, primarily related to our acquisitions as well as an incremental reduction in our real-state footprint. Our Investible Cast Physician at the end of the first quarter was $481 million.

Finally.

Global fee revenue for executive search in the first quarter was $205 million and as expected experienced a year over year decline of 12% at constant currency compared to the high growth rates enjoyed during the pandemic recovery in the first quarter of last year demand continued to moderate most notably in north.

Erica in Latin America, followed by EMEA and APAC.

Global New business in the first quarter for executive search was down 14% year over year at actual and constant currency.

I will now turn the call back over to Bob to discuss our outlook for the second quarter of fiscal 'twenty four great. Thanks, Tiffany now assuming no new major pandemic related Lockdowns are further changes in worldwide geopolitical conditions economic conditions financial markets and foreign exchange rates, we expect fee.

Gregg Kvochak: In the first quarter we deployed $34 million of cash, four for share repurchases, eight for dividends, 13 for capital expenditures, and nine for debt service.

Tiffany Louder: Now turn the call over to Tiffany to review our operating segments in more detail. Thanks, Gregg. Starting with KF Digital, global fee revenue in the first quarter was $88 million, which was up 5% year over year at actual and at constant currency. Digital subscription and license fee revenue in the first quarter was $33 million, which was approximately 37% of fee revenue for the quarter. The increase was primarily due to the continued execution of our strategy to move from point-scale solutions to longer-term subscription and license sales.

Revenue in the second quarter of fiscal 'twenty four two range from 675 million to $695 million, our adjusted EBITDA margin to be 13, 5% to 14%.

And our consolidated adjusted diluted earnings per share to range from 91.

Two $1 one.

Finally, we expect our GAAP diluted earnings per share to range from 85.

<unk> thousand 97.

Now in closing we have amassed a unique collection of intellectual property data content and science.

Tiffany Louder: And also an increase in assessment tools as the technology industry began investing again with a focus on leadership development. Global New Business for KF Digital was $93 million, with $32 million or 34% of the total tied to subscription and license sales. For consulting, fee revenue in the first quarter was $168 million, which was up approximately 1% at both actual and constant currency, fee revenue growth was strongest in assessment and succession, which increased 10% year over year.

It really is aligned to helping companies solve their business and human capital issues with these assets. We will continue to partner with clients, helping them build long term talent strategies, we're balanced company growth with the needs of employees.

Also with the synergistic assets, which really touch every aspect of an employee's engagement with with his or her employer.

We are well positioned to continue to drive topline growth.

No business issue or problem is ever been solved without the involvement of people and that's exactly where we come in working through and with people we help individuals.

Tiffany Louder: Average hourly bill rates continued to climb, now close to $400 an hour, which is up over $30 an hour from just one year ago. Additionally, global new business for consulting in the first quarter was up 7% year over year at constant currency, with double digit growth in Amia and Latin America. The professional search and interim business increased 29% at constant currency in the first quarter versus last year, driven by double digit strength in North America and aided by the current year acquisition.

And organizations exceed their potential everyday.

With that we would be glad to answer any questions you may have.

Yeah.

Ladies and gentlemen, if you'd like to ask a question. Please press. One then zero on your telephone keypad you may withdraw your question at any time by repeating the one zero command if youre using a speakerphone. Please pick up the handset before pressing the numbers 11 again, if you have a question. Please press one zero at this time and one moment. Please for your first question.

Tiffany Louder: Total fee revenue was $142 million, up $43 million or 44% over the same time period. Breaking down the quarter, growth in the interim business was more than enough to offset moderation in the permanent placement portion of the segment. Interim services fee revenue grew to $84 million from $25 million in the same quarter of the prior year, driven primarily by the recent acquisitions. Permanent placement fee revenue declined by $16 million to $58 million year over year, down 22% at actual and down 21% at constant currency.

Your first question comes from the line of George Tong from Goldman Sachs. Please go ahead.

Alright. Thanks, good morning in the past you provided data on cross selling interim search across your various segments can you provide an update on cross selling in include traction with business lines beyond interim.

Particularly within your marquee and regional accounts.

Yes.

<unk> to be very very good we find overall for the platform.

Tiffany Louder: Moving on to recruitment process outsourcing, new business for the first quarter was $48 million and total revenue under contract at the end of the quarter was approximately $680 million. Fee revenue totaled $96 million, which was down 18 million or 16% year over year and down approximately 16% at constant currency. Fee revenue was impacted by a moderation in hiring volume in the base and backlog. We see this slowdown as transitory and believe RPOs well positioned to benefit when hiring returns to more normalized levels in the base and the larger, more recent wins begin converting to Fee revenue. New.

Number one the global marquee and regional accounts are almost 40% of the portfolio.

And then when you look at the cross referrals.

They're typically in any quarter 25 to 30 per site.

And you would find that cross referral percentage to be higher.

Into our P O in the pro search for sure when you see the cross referrals into digital it's about 35% or so.

So overall it continues to demonstrate that the strategy is working that we have more reason to talk to clients.

Tiffany Louder: Although the quarterly new business can be choppy at times, the pipeline remains strong as RPO continues to win new business, the differentiated service offering in the marketplace, which includes our new data-driven recruiting technology, Nimble, that uses, that draws upon our unique data, IP, and talent management expertise. Finally, global fee revenue for executive search in the first quarter was 205 million, and as expected, experienced a year-over-year decline of 12% at constant currency, compared to the high growth rates enjoyed during the pandemic recovery in the first quarter of last year. Demand continued to moderate, most notably in North America and Latin America, followed by Amia and APEC. Global new business in the first quarter for executive search was down 14% year-over-year at actual and at constant currency.

And that continues to be a huge opportunity for the firm.

Got it that's helpful and then within your IPO business.

New business fell approximately 68% year over year to $48 million in the fiscal first quarter and you talked a little bit about what youre seeing within <unk> and when you would expect new business trends to improve.

Well I think the you know the.

One of the broader trend, but it's happening.

And what I would I really consider it to be.

Our multi quarter cyclical re side is what I would call labor hoarding.

And it wasn't that long ago, three and a half years ago when companies had to take pretty drastic measures.

Bob Rozek: I will now turn the call back over to Bob to discuss our outlook to the second quarter of fiscal 24. Great, thanks, Tiffany. Now, assuming no new major pandemic-related lockdowns or further changes in worldwide geopolitical conditions, economic conditions, financial markets and foreign exchange rates, we expect fee revenue in the second quarter of fiscal 24 to range from $675 million to $695 million. Our adjusted EBITDA margin to be 13.5 to 14%. And our consolidated adjusted deluded earnings per share to range from 91 cents to $1. Finally, we expect our gap deluded earnings per share to range from 85 cents to 97 cents.

Given given what was happening.

With with Covid, but then you had this incredible uplift.

In demand almost overnight.

You had the great resignation and you saw you saw people switching jobs getting.

20%, 25%.

Salary bumps and there was really a mad dash for talent and I think that many Ceos.

Have been reluctant.

To take.

Drastic action on their workforce and and one of the hardest position to recruit during the great resignation.

We've actually recruiters and so companies built up.

Bob Rozek: Now, in closing, we have amassed a unique collection of intellectual property, data, content and science that really is aligned to helping companies solve their business and human capital issues. You know, with these assets, we will continue to partner with clients, helping them build long-term talent strategies that balance company growth with the needs of employees. Also, with these synergistic assets, which really touch every aspect of an employee's engagement with his or her employer, we are well positioned to continue to drive top-line growth.

Fairly robust.

Our staff.

And I think what Youre seeing now is in.

In sourcing, which is something that I haven't seen.

Mr. I think this is my 86 earnings call.

And I just.

You typically don't see that at this point in a cycle.

And I would call it labor hoarding and so that's definitely impacted our RPM business.

And when you look at new business. It does tend to be very very lumpy.

Bob Rozek: No business issue or problem has ever been solved without the involvement of people. And that's exactly where we come in, working through and with people. We help individuals and organizations exceed their potential every day.

So the last couple of years, we've done about $600 million or so.

In new business in each of those years.

The first quarter, we did like 50 here I would expect the second quarter, but that number will be substantially higher maybe you know.

Bob Rozek: With that, we would be glad to answer any questions you may have.

100 to 150 now.

Operator: Ladies and gentlemen, if you'd like to ask a question, please press one and zero on your telephone keypad. You may withdraw your question at any time by repeating the one-zero command.

Now would I expect new business to be 600 again in this year now I wouldn't.

Operator: If you're using a speaker phone, please pick up the handset before pressing the numbers. Once again, if you have a question, please press one and zero at this time. And one moment, please, for your first question.

But would it be.

525.

550, <unk>, Yeah, I think I think that's a reasonable estimate and look the pipeline is typically set it looks very very good the backlog looks good.

George Tong: Your first question comes from the line of George Tongue from Goldman Sachs. Please go ahead. All right, thanks. Good morning. In the past, you've provided data on cross-selling, interim search across your various segments. And you provide an update on cross-selling and include traction with business lines beyond interim, particularly within your marquee and regional accounts. It continues to be very, very good. We find overall for the platform. Number one, the global marquee and regional accounts are almost 40% of the portfolio.

But clearly in sourcing and labor hoarding, absolutely, having an impact on that our Apio business no question about it.

George Tong: Then when you look at the cross referrals, they're typically in any quarter 25 to 30%. And you would find that cross referral percentage to be higher into RPO, into Pro Search, for sure. When you see the cross referrals and the digital, it's about 35% or so. So, you know, overall it continues to demonstrate that the strategy is working, that we have more reasons to talk to clients. And, you know, that continues to be a huge opportunity for the firm. Got it. That's helpful.

And Gary This is Rob I'll just.

George This is Bob just to weigh in a little bit if you noticed when we talk about new business.

Always do it without <unk> because of the Choppiness that we see.

In that business. So you can't really look at one quarter in isolation and say that new business is up or down I think you have to look at it over some time horizon. In fact, if you go back.

Last year in FY2023 it was like $150 million in Q1 was $2 90 in Q2 was <unk> 44 in Q3 and $1 15 in Q4. So you don't see the sort of smooth linear pattern in <unk> that perhaps you do in the other businesses. So you just have to keep that in mind as you think about.

The ERP on new business and as Gary said, we feel.

Very very good about the pipeline and the strength of that pipeline.

Very helpful. Thank you.

Your next question comes from the line of Mark Marcon from Baird. Please go ahead.

Yes.

Hey, good afternoon I was wondering.

Gary you talked a little bit about this.

George Tong: And then within your RPO business, new business fell approximately 68% year over year to 48 million in the fiscal first quarter. Can you talk a little bit about what you're seeing within RPO and when you would expect new business trends to improve? Well, I think the, you know, the one of the broader trends that's happening in what I would I really consider to be a multi quarter cyclical reset is what I would call labor hoarding.

This research and lasting a few quarters, and particularly getting used to the higher for longer interest rates.

Aside from the labor forwarding that youre observing what what other factors are you thinking about and you mentioned that you might be able to take advantage of some of those what are you thinking about from that perspective.

Well I think our consulting business is perfectly.

Positioned to take advantage of companies.

We are going to continue to do to execute I think a strategy that.

George Tong: And you know, it wasn't that long ago, three and a half years ago, when companies had to take pretty drastic measures, given what's happening with COVID, then you had this incredible uplift in demand almost overnight. You had the great resignation. And, you know, you saw, you saw people switching jobs, you know, getting 20%, 25% salary bumps. And there was really a mad dash for talent. And I think that many CEOs have been reluctant to take, you know, drastic action on their workforce.

Somewhat mirrors ours, I think you have to optimize.

What you have you have to innovate or you have to consolidate and when I look at some of the new wins in the consulting business, they're absolutely around companies optimizing and reorganizing and restructuring.

We haven't seen the impact of a higher cost of carry of higher interest rates really I mean, we've seen a little bit of it.

And the level of consumer savings that they had at least in the United States has been that's lasted way longer than what people would have thought six quarters ago.

But I think that.

This.

Companies are absolutely you can only shrink the packaging and raise the pricing.

George Tong: And one of the hardest positions to recruit during the great resignation was actually recruiters. And so companies built up fairly robust HR staff. And I think what you're seeing now is in sourcing, which is something that I haven't seen, just I think this is my 86 earnings call. And I just, you know, you typically don't see that at this point in a cycle. And I would call it labor hoarding. And so that's definitely impacted our RPO business.

So much and what we're starting to see in on particularly the consulting businesses organizations and governments turning to us on how they can rethink their organizational structure their people their talent all of that so I think that's a great opportunity for us.

And to continue to use the digital platform as well, but we have to drive change within organizations.

Great.

I mean.

Hugh you have.

A lot of high level discussions I mean, when youre talking to some of the business leaders at some of your Mark key accounts.

George Tong: And you know, when you look at new business, it does tend to be very, very lumpy. So the last couple years, we've done about $600 million or so in new business in each of those years. In the first quarter, we did like 50 here. I would expect the second quarter that that number will be substantially higher, maybe, you know, 100 to 150. Now, would I expect new business to be 600 again in this year?

Yeah.

What is your sense for how they're thinking about like how long this is going to last.

Well it varies.

Some are more optimistic than others and I think it does depend what what geography.

As summarized in parts of the World, where things are just going all out and very very robust and there is others, where they have a more custom misfit.

Pessimistic mood, but you just you look do you step back and the reality is over.

George Tong: Now, I wouldn't. But, you know, would it be $5.25, $5.50? Yeah, I think that's a reasonable estimate. And, you know, look, the pipeline, as Tiffany said, looks very, very good. The backlog looks good. But clearly, in sourcing and labor hoarding, it's absolutely having an impact on that RPO business. No question about it. And Gary says, just a little bit, if you notice when we talk about new business, we always do it without our PO because of the the choppiness that we see in that business.

Two to three decades.

Much of the world has been used to cheap money.

And low interest rates.

That is being reset and it's being reset to I think the more you know more historical norm.

And.

Companies are going to have to adapt.

To that environment, I really don't see that changing.

Over the next few quarters.

Now for us and for the the business that we're in not only on the consulting side, but look the labor force really hasn't grown and if you look out.

George Tong: So you can't really look at one quarter of an isolation and say that, you know, new business is up or down. I think you have to look at it over, you know, some time horizon. In fact, if you go back last year in FY23, you know, it was like 150 million in cubes. Q1 was 290 and Q2 was 44 and Q3 and 115 and Q4. So you don't see the sort of smooth linear pattern in our PO that perhaps you do in the other businesses, you just have to keep that in mind as you think about the IPO new business. And it's very, very good about the pipeline and the strength of that pipeline. Very helpful.

Longer term there.

George Tong: Thank you.

There is real demographic challenges that most western economies have.

And I think that's extraordinarily positive for our business and I think that's you know the concept around flexibility and work and people living longer and wanting to contribute.

I look at the interim business and say that that should be a billion dollar business for Korn ferry.

And that's what we're going to we're going to continue to a jaw to invest.

In that market, particularly around <unk>.

Skilled positions technologists finance and accounting.

Mark Marcon: Your next question comes from the line of Mark Marcon from Baird. Please go ahead. Good afternoon. I was wondering, Gary, you talked a little bit about this, you know, this reset and lasting a few quarters and particularly getting used to the higher for longer interest rates. Aside from the labor hoarding that you're observing, what other factors are you thinking about and you mentioned that you might be able to take advantage of some of those.

Supply chain.

That's a big market opportunity for us.

I personally think that this is multi quarter I think that this kind of environment that we're in now barring. Some you know some some disaster I think.

I think we're in this for a little bit here.

Agreed.

Gary with regards to the interim business.

Give us the total revenue numbers, what was the organic growth within say low end.

Mark Marcon: What are you thinking about from that perspective? Well, I think our consulting business is perfectly, you know, positioned to take advantage of. You know, companies are going to continue to execute. I think it's strategy that, you know, somewhat mirrors hours. I think you have to optimize what you have, you have to innovate or you have to consolidate. And when I look at some of the new wins in the consulting business, they're absolutely around companies optimizing and reorganizing and restructuring.

And the different components that you bought what are you. What are you seeing in terms of just organic growth with with regard.

When I look at let me just go to new business. Okay. So I'll just take the trailing let's take trailing you know four months.

New business not not revenue I would say that same store sales new business in the interim is down about 6% or so.

In actual dollars it would be down 2%. So same same store sales organic down about 6%.

Mark Marcon: You know, we haven't seen the impact of a higher cost of carry of higher interest rates, really. I mean, we've seen a little bit of it. And the level of consumer savings that they had, at least in the United States, has been, you know, that lasted way longer than what people would have thought six quarters ago. But I think that, you know, that this, you know, that companies are absolutely, you know, you can only shrink the packaging and raise the pricing, you know, so much.

Yeah.

It's actually pretty good considering the environment is it getting a little bit worse by month or.

No no yeah, no. It's steady I mean, it's exactly like the executive search business.

Trailing four months.

And it's about the same it's down you know kind of 13, 14%. This is new business not revenue and consulting by the way is up 14%.

Mark Marcon: And what we're starting to see, and I'm particularly the consulting business is organizations and governments turning us on how they can rethink their organizational structure, their people, their talent, all of that. So I think that's a great opportunity for us. And, you know, to continue to use the digital platform as well that we have to drive change within organizations. Right. And I mean, you have a lot of high level discussions. I mean, when you're talking to some of the business leaders at some of your marquee accounts, I mean, what is your sense for how they're thinking about, like, how long this is going to last?

Trailing four months. So you know the strategy is absolutely bearing out.

Great and then can you talk to Gary the only thing.

Hey, Marc the other thing I would add I would add to it.

When you look at the interim businesses, we're feeling more in the.

Similar to what's happening in the industry and the vertical.

In the.

The executive or FMA areas in that business.

But it is a little bit softer Bob.

Yeah, that's the area that.

We're feeling the predominant.

Decline.

Yep.

And then EMEA with regards to executive search was was fairly resilient.

Mark Marcon: Well, it's very summer, more optimistic than others, and I think it does depend on what geography this summer I was in parts of the world where things are just going all out, and very, very robust, and there's others where they have a more customistic mood, but you just look, you step back and the reality is over two to three decades, much of the world has been used to cheap money and low interest rates. That is being reset, and it's being reset to, I think, a more historical norm, and companies are going to have to adapt to that environment.

You know theres lots of reports about Germany going into recession, the U K, having issues what would you explain the resilience.

In EMEA on a constant currency basis, what's driving that and then can you also like drill down a little bit on the margins because the margins did decline significantly.

And that portion of the business despite.

Revenue being relatively resilient.

I'll, let Bob Bob to comment on the margins I do have good line of sight into it because I was there for quite some time.

There are parts of EMEA and you could probably guess that are growing extraordinarily well.

And then there are other parts such as the country you mentioned that it's not quite the case I think it's I think number one you have to look at our global marquee and regional account strategy and I think that that is working globally and it's certainly working in EMEA.

Mark Marcon: And I really don't see that changing over the next few quarters. Now, for us, and for the business that we're in, not only on the consulting side, but the labor force really hasn't grown, and if you look out longer term, there's real demographic challenges that most Western economies have, and I think that's extraordinarily positive for our business, and I think that the concept around flexibility and work and people living longer and wanting to contribute, I look at the interim business and say that should be a billion dollar business for Korn-Ferry, and that's what we're going to continue to invest in that market, particularly around skill positions, technologists, finance and accounting, supply chain.

And I think the investments that we've made in how we've positioned the portfolio there.

As it turned out to be exactly right, we have world class people.

The cross referral rates are very very healthy. So I think it's a combination of all of those but youre right. I mean look it's not one size does not fit all.

There are a couple of countries that are that are that are more challenged certainly than others, but again.

Step back and you look at this and you say you know.

Labor markets have not grown there is there continues to be.

You know what talked about look look at labor hoarding there continues to be.

Skill shortages and and theres going to be demographic shortages too.

So I'd point to those factors for the EMEA growth and then Bob on the margins yes.

Mark Marcon: That's a big market opportunity for us. I personally think that this is multi-quarter. I think that this kind of environment that we're in now, barring some disaster, I think we're in this for a little bit here. Agreed. Gary, with regards to the interim business, gave us the total revenue numbers. What was the organic growth within Salo and the different components that you've bought? What are you seeing in terms of this organic growth with regard to that?

Yes, I would say mark on the margin side, one of the things we've talked about over the past couple of calls is workforce rebalancing right. So one of the things we're doing very consistently nowadays is taking a look at.

Workforce, where are the opportunities where do we have capacity.

And readjusting the staffing levels accordingly.

As you I'm sure you're aware when you do any sort of rebalancing in Europe . The cost of doing that is a bit higher than it is.

Across the rest of the globe, so what youre kind of seeing there.

The output from us looking at search business and in Europe , and going through with the workforce rebalancing.

Mark Marcon: When I look at it, let me just go to new business. Okay, so I'll just take the trailing. Let's take trailing four months. New business, not revenue. I would say that same-store sales, new business and interim is down about six percent or so. In actual dollars, it'd be down to two percent. So same-store sales, organic, is down about six percent. Actually, pretty good considering the environment. Is it getting a little bit worse by month or as it's been holding cutting?

Got it.

Great and then when you think about this environment.

I don't know if this is for Gary or Bob, but just when you think about the environment and thinking about it lasting for a while longer.

Outside of normal seasonality do you do you feel like were.

Basing or.

Or do you think things could get a little bit worse than trying to get a sense for if you think that the you know the margins that you are projecting for this.

Mark Marcon: No, no. Yeah, no, it's steady. I mean, it's exactly like the executive search business. I take trailing four months and it's about the same. It's down 13 or 14 percent. This is new business, not revenue. And consulting, by the way, is up 14 percent trailing four months. So the strategy is absolutely bearing out. Wait, can you talk a little bit about it? Hey Mark, the only thing I would add to that is when you look at the interim businesses, we're feeling more in the similar to what's happening in the industry and the IT vertical than in the executive or F&A areas in that business.

The current quarter that we're in are kind of like towards the bottom end of the range or if there is more downside.

Could occur.

Sure.

Just on how you think the environment will end up shaping up.

Well, that's Oh look Mark that's a very difficult question I think China is a huge wildcard.

That was a third of the world's manufacturing.

The war in Ukraine is another big wildcard.

And the impact on energy in EMEA are with respect to that war.

It's hard to predict in the middle East how theyre cutting oil production is another one I mean, those are really big variables.

Mark Marcon: But the IT is a little bit talker Bob? Yeah, that's the area that's where we're feeling a predominant decline. Yeah. And then, Emma, with regards to executive search was fairly resilient. You know, there's lots of reports about Germany going into recession, the UK having issues. What would you explain to resilience in a maya on a constant currency basis? What's driving that?

To try to guess I. My baseline is is that we're in that's now for some quarters that there's a huge reset happening.

Companies are going to have to optimize and reorganize and transform to adjust to this new reality there is tremendous demographic shortages.

Mark Marcon: And then can you also drill down a little bit on the margins because the margins did decline significantly in that portion of the business despite revenue being relatively resilient? I'll let Bob comment on the margins. I do have good line of sight in the end, because I was there for quite some time. There are parts of maya that you could probably guess that are growing extraordinarily well. Then there are other parts, such as the country you mentioned, that it's not quite the case.

I mean, you know you go out long term in the United States and what you'd find is that for every person.

That's over 65, there's only gonna be one person working whereas today its kind of two to one I mean that's.

That's definitely eye opening.

And so it's really you know those are huge wildcards I would only say that if you look at.

At the last few months it certainly would appear.

Mark Marcon: I think it's, I think number one, you have to look at our global marquee and regional account strategy. And I think that that is working globally and it's certainly working in a maya. And I think the investment that we've made and how we've positioned the portfolio there has turned out to be exactly right. We have world-class people, the cross with throw rates are very, very healthy. So I think it's a combination of all of those, but you're right.

Executive search and pro search are running about you know.

On a plateau basis.

And consulting and digital have done very well and we've got this huge opportunity around the interim that's not going to go away.

Great. Thanks for the answers.

Your next question comes from the line of Trevor Romeo. Please go ahead.

Hi, Thanks, so much for taking the questions.

Mark Marcon: I mean, look, it's not one size that's not at all. And there are a couple of countries that are more challenged certainly than others. But again, you know, you just step back and you look at this and you say, you know, labor markets have not grown. There is, there continues to be despite, you know, what we talk about, look, look at labor hoarding. There continues to be skill shortages. And there's going to be demographic shortages too.

Hopefully you can hear me I've been having some connection issues. So I apologize if I missed any of this already but.

But I was just kind of wanted to ask about.

On the guidance I was wondering if you could maybe kind of break down your expectations for each segment I think your normal seasonality would kind of indicate an uptick sequentially. In Q2. So just wondering if maybe any of the segments would be further off the normal seasonal patterns than others.

Bob I'll, let you do that.

Mark Marcon: So I'd point to those factors for the, the immediate growth and then Bob on the margins. I would say Mark on the margins side, you know, one of the things we've talked about over the past couple of calls is workforce rebalancing. Right. So one of the things we're doing very consistently nowadays is taking a look at our workforce, where are the opportunities, where do we have capacity and readjusting, you know, the staffing levels accordingly.

Sure So I think.

As Gary indicated we're seeing the Perm placement exec search in process.

Sort of plateauing at this point, so as we think about the guidance.

We're thinking about.

From a quarter sequential basis kind of kind of flattish for each of those.

Each of those businesses.

On the consulting side Q2 is normally a quarter for us.

Mark Marcon: And is you I'm sure you're aware when you do any sort of rebalancing in Europe, the cost of of doing that is a bit higher than it is across the rest of the globe. So what you're kind of seeing there is the, you know, the output from us looking at search business in Europe and going through with the workforce rebalancing. You had it great. And then when, when you think about this environment, I don't know if this is for Gary or Bob, but just when you think about the environment and thinking about it lasting for a while longer.

We're looking at that as being slightly up from.

From Q1.

Same thing with digital slightly up from and again I'm talking sequentially up from the first quarter.

And then in the on the interim side.

Business as well as being.

It was slightly flat to maybe down a little bit as we as we think about what's going on with the vertical.

Mark Marcon: You know, outside of normal seasonality, do you feel like we're, you know, basing or do you think things could get a little bit worse and trying to get a sense for if you think that the, you know, the margins that you're projecting for this, this, the current quarter that we're in, you know, are kind of like towards the bottom end of the range or if there's more downside that, you know, could occur. Based on how you think the environment will end up shaping up.

But when you look at the midpoint of the guidance. It would suggest that were kind of flat again.

Again, the Perm placement portion plateauing.

Consulting being up a bit digital up a bit in the interim.

Down a little bit.

Okay, Great that was helpful. Thanks, and then just on the consulting segment.

It's nice to see the solid performance in the quarter and some positive new business trends and just kind of wondering if you could maybe talk about each of the business areas within consulting kind of what's driving the performance there.

Reception among clients.

I think we have got number one I think it's the environment in terms of companies that are having to adopt.

Mark Marcon: Well, that's a look, Mark. That's a very difficult question. I think China is a huge wild card. You know, that was a third of the world's manufacturing. The war in Ukraine is another big wild card. And the impact on energy in Amia with respect to that war is hard to predict in the Middle East how they're cutting oil production is another one. I mean, those are really big variables.

To do this to this reset that but I've talked about.

That's definitely.

A big part of it whether it's whether it's government.

Whether it's the infrastructure Act.

Here in the United States.

That's clearly.

A major trend that's driving the the consulting engagements, we see we're seeing more and more integrated consulting engagements not just assessment of succession, but actually across the.

Mark Marcon: To try to, to guess, my baseline is that we're in this now for some quarters, that there's a huge reset happening. Companies are going to have to optimize and reorganize and transform to adjust to this new reality. There is tremendous demographic shortages. I mean, you know, you go out long-term in the United States and what you'd find is that, you know, for every person that's over 65, there's only going to be one person working, whereas today it's kind of two to one.

The entire solution side, I think we have an enormous opportunity around rewards compensation and benefits both on consulting and digital.

The data that we have is just so robust.

And the opportunity to monetize that data we have comped at AR.

On $30 million.

30 million people around the world 30000 companies.

That's an opportunity for us for sure.

And you know that to.

To continue both consulting and digital.

Mark Marcon: I mean, that's, you know, that's definitely eye opening. And so it's really, you know, those are huge wild cards. I would only say that if you look at the last few months, it certainly would appear that executive search and pro search are running about, you know, on a plateau basis.

Monetize this IP the assessment data that we have a we've done 100 million assessments of people that's another one as well.

Alright, Thank you very much.

Your next question comes from the line of Tobey Sommer from choice Securities. Please go ahead.

Thanks wanted to dig into one of your responses on on.

Mark Marcon: And consulting and digital have done very well and we've got this huge opportunity around interim that's not going to go away.

An interim.

Is that weakness.

Which predominantly is there for in Germany is that declining sequentially at this point or did it fall earlier in the year and we're still having sort of year over year declines on that basis.

Mark Marcon: Great.

Mark Marcon: Thanks for the answers.

Trevor Romeo: Your next question comes from the line of Trevor Romeo. Please go ahead. Hi, thanks so much for taking the questions. Hopefully you can hear me. I've been having some connection issues. So I apologize if I missed any of this already. But I just kind of wanted to ask about, you know, on the guidance, I was wondering if you could maybe kind of break down your expectations for each segment. I think your normal seasonality would kind of indicate an uptick sequentially in Q2. So just wondering if maybe any of the segments would be further off the normal seasonal patterns than others. Bob, I'll let you do that.

Yes, Tobey, it's Bob I would say that the it.

It was a couple of things impacting it the decline that you're seeing on the interim side. One was we had a particularly large contract ahead, a defined life to it.

So that kind of clouded a little bit because the project concluded and went away I would say that the what we're seeing in terms of the sort of sequential activity.

Bob Rozek: Sure. So I think Trevor is Gary indicated, you know, we're seeing the pern place and exec search and pro search. I'm sort of a plateauing at this point. So as we think about the guidance, you know, we're thinking about, you know, from a quarter sequential basis. You're kind of kind of flatish for each of those, each of those businesses, on the consulting side, Q2 is normally an up quarter for us and we're looking at that as being slightly up from Q1.

On the it side.

The level of decline.

Is <unk>.

Absolutely decelerating at this point and I would say 11, we get past.

The Q1 to Q2 sequentially, we would expect based on everything we're seeing today that kind.

Kind of plateau as well.

Yeah.

Okay. Thanks.

I just had a couple more prior slowdowns had been followed by rapid growth.

I think we've described on this call. This is a little bit more of a normalization reset, but we havent had sort of all the classic tells us.

A recession and a change in the labor market on the negative side.

What kind of growth can we what can it looked like on the other side if we.

Bob Rozek: Same thing with digital, slightly up from, again, I'm talking sequentially up from the first quarter. And then the interim side, you know, that business as well as being, you know, slightly, you know, flat to maybe down a little bit as we think about, you know, what's going on with the IT vertical. But when you look at the, you know, the midpoint of the guidance, it would suggest that we're, you know, kind of flat with, you know, again, the pern placement portion, flat towing, consulting being up a bit, digital up a bit, and then interim, you know, down a little bit.

We as an economy here sort of stick the soft landing and unemployment in the U S doesn't really rise.

Okay.

Well.

You know it depends on what.

First go back to Okay. What's you know whats Korn ferry's actual CA.

CAGR, what do we look like you know and I think and Gregg can correct me on these numbers but.

Our 10 and 20 year CAGR as are probably you know 12 13, 14%.

All in that's both organic and inorganic so I'm thinking number one have to say, okay. What does this organization done historically.

Bob Rozek: Okay, great, that was helpful, thanks. And then just on the consulting segment, it's nice to see the solid performance in the quarter and some positive new business trends. We're just kind of wondering if you could, you know, maybe talk about each of the business areas within consulting, kind of what's driving the performance there and the, you know, reception among clients. I think we've got, number one, I think it's the environment in terms of companies that are having to adapt to this, to this reset that I've talked about.

And is there any reason to believe in that going forward and I think there's a whole host of reasons.

Why this company is even better positioned today than say it was 10 years ago. So I think you have to look at that as kind of.

A baseline.

And.

Then you kind of go from there and you've got a new well.

Bob Rozek: That's, that's definitely a big part of it, whether it's, whether it's governments, whether it's the infrastructure act in the, here in the United States. That's clearly a mega trend that's that's driving the, the consulting engagements we see, we're seeing more and more integrated consulting engagements, not just, you know, assessment or succession, but actually across the entire solution set. I think we have an enormous opportunity around rewards, compensation, benefits, both on consulting and digital.

We have a new business going out a new market.

Around people that want flexibility in their life and companies that want to employ flexible labor and that certainly for us.

That's a relatively new business and in the span of 18 20 months, we've created a 330 $350 million business I think that could be easily.

$1 billion.

The consulting business is.

The market opportunity there is multibillion dollars.

Bob Rozek: You know, the data that we have is just so robust. And, you know, the opportunity to monetize that data, we have comp data on 30 million, 30 million people around the world, 30,000 companies. That that's an opportunity for us for sure. And, you know, to continue both consulting and digital to monetize this IP, the assessment data that we have, you know, we've done 100 million assessments of people and that that's another one as well.

We've demonstrated that we can drive an integrated go to market strategy. We've got cross referrals at 25, 30%, we've got a global marquee and regional account straight it's a strategy that's 40% of it.

Bob Rozek: All right. Thank you very much.

So you know everything absolutely points to that baseline.

And more honestly.

I do think that the labor market.

Is going to continue to experience shortages.

And.

The late concept of labor hoarding.

That's for a reason.

Toby Sommer: Your next question comes from the line of Toby Summer from Truace Securities. Please go ahead. Thanks.

You know the markets are efficient.

The truth is the United States Labor market really hasn't moved.

Toby Sommer: I wanted to dig into one of your responses on, on IT and interim, is that weakness, which predominantly is there for intimate, is that declining sequentially at this point, or did it fall earlier in the year and we're still having sort of year over year declines on that basis? Yeah, Toby, Bob, I would say that the, well, there's a couple of things affecting it, the client that you see on the interim site.

Tremendously.

Over the last several years and I think you look out.

Further and it's you know it's you just don't see it.

Huge number of people entering the labor for them. So I mean, it's going to be fairly fairly modest.

The ability to monetize IP is still it's incredibly important for us.

And that business is around $90 million today 80 $590 million.

Toby Sommer: One was, we had a particularly large contract ahead of defined life to it. And so that kind of clouds a little bit because the project concluded and went away. I would say that the, what we're seeing in terms of the sort of sequential activity on the IT site, the level of decline is absolutely decelerating at this point. And I would say, once we get passed. You know, the Q1 to Q2 sequentially, we would expect based on everything we're seeing today that the kind of plateau as well.

And we have to continue to look at that.

And and Fi find ways to embed our IP across all of our solutions.

It's very scalable it's incredibly profitable.

And so that's how I would look at this organization I think it's I really think it's at the beginning.

Of what it can be.

Okay.

And this is something I've struggled with as you grow the interim business.

Two $1 billion, maybe use that as a as a.

As a target.

What does the associated increase in your total addressable market look like and I know, we could look at M&A.

Toby Sommer: Okay, thanks. I just had a couple more, you know, prior slowdowns have been followed by rapid growth. And I think we've just got done this call. This is a little bit more of a normalization reset. But we haven't had sort of all the classic tells of a recession and a change in the labor market on the negative side. What kind of growth can we, what could it look like on the other side if we, we as an economy here sort of stick this soft landing and unemployment, US doesn't really rise significantly.

And kind of those numbers are established and out there, but if you're going to continue to hold tight to the idea that you're going to have among the highest bill rates and are focused on that part of the market.

Those.

Sizes of the Tam Orange is readily available, but you might be able to help us with that.

Well that's for sure I mean it is it is definitely it's definitely you know more artwork for sure to try to triangulate.

Toby Sommer: Well, you know, it depends on what, you know, I would first go back to, well, okay, what's, you know, what's Korn-Ferry's actual keger? What do we look like, you know, and I think and Gregg can correct me on these numbers. But, you know, our 10 and 20 year kegers are probably, you know, 12, 13, 14%. Yeah, all in. That's both organic and inorganic. So I think you number one, have to say, okay, what, what is this organization done historically?

To that.

<unk>.

I I think I'm.

Getting that exact percentages is very very hard to do.

But I do think we do need to stack.

To the upper end of that market I think that's where we have the most revenue synergy.

And the ability for cross referrals and the ability to feed into our.

Global.

Toby Sommer: And is there any reason to believe in that going forward? And I think there's a whole host of reasons why this company's even better position today than say it was 10 years ago. So I think you have to look at that. It's kind of a baseline. And, you know, then, then you kind of go from there and you've got a new, we have a new business going out a new market around, you know, people that want flexibility in their life and companies that want to employ flexible labor.

Marquee and regional accounts.

We look at the total addressable market for Korn ferry.

250, $300 billion and the two big pieces of that would.

It would be number one around training learning development.

Today for Korn Ferry, that's probably 10 11, 12% of the firm.

I think were completely undersized in what that can be we develop over 1 million professionals a year.

Toby Sommer: And that's certainly for us, that's a relatively, you know, new business. And in the span of, you know, 18, 20 months, we've created a $330, $350 million business. I think that could be easily a billion dollars. The, the consulting business is the market opportunity there is multi billion dollars. We've demonstrated that we can drive an integrated go-to-market strategy. We've got cross referrals at 25, 30%. We've got a global marquee regional account strategy that's 40%.

I think that's a big opportunity the other big part of that market.

Would be whats generally referred to as staffing.

I think we would need to stack at the very very high end of that so just rough numbers I mean, if you think the addressable market for Korn Ferry is 250 $300 billion I mean, you know the market better than I.

But I think that that $1 billion would still be a relatively small percentage of the high end of that market.

For sure.

But we but tell me we have to stick at that high end I do not see us.

Bob Rozek: So, you know, everything absolutely points to that baseline and more, honestly. I do think that the labor market is going to continue to experience shortages. And, you know, the, the late concept of labor hoarding, you know, that's for a reason. You know, markets are efficient. And the truth is the United States labor market really hasn't moved tremendously over the last several years. And I think you look out further and it's, you know, it's, you just don't see, you know, a huge number of people entering the labor force.

Going down we just we don't get we don't enjoy the revenue synergy and the revenue uplift. So R. R.

As you know is to stick with.

Technology, finance and accounting operations supply chain and HR and when you look at that interim business today, it's predominantly in the United States.

And so you would you would also have to say Korn ferry.

Needs to be looking.

At other places in the World.

Where there is clearly opportunity.

But we're very mindful of.

Of that question and the implication and where we should really be playing there.

Bob Rozek: I mean, it's going to be fairly, fairly modest. The ability to monetize IP is, still, it's incredibly important for us, and you know, that business is around $90 million today, $85, $90 million, and we have to continue to look at that and find ways to embed our IP across all of our solutions.

It's a good insight good question and certainly one that we that we consider pretty pretty.

Seriously.

For sure.

Thank you if I could sneak one last one in.

I'd like you to expand on your comment about.

And in sourcing trends impacting our Po.

How do you think that will evolve and is there.

Bob Rozek: It's very scalable, it's incredibly profitable, and so that's how I would look at this organization. I think it's, I really think it's at the beginning of what it can be.

Is there evidence of.

Recruiting in sourcing sort of a reaction to the high the great resignation.

And is it impacting or do you think it may any other aspects of your business in the market.

Bob Rozek: Okay. And this is something I've struggled with as you grow the interim business up to a billion dollars and have used that as a target. What does the associated increase in your total addressable market look like? And I know we could look at FNA or IT, and kind of, those numbers are established and out there, but if you're going to continue to hold tight to the idea that you're going to have among the highest bill rates and a focus on that part of the market, those sizes of the TAM aren't as readily available, but you might be able to help us with that.

No I think it's.

We're seeing it really within our P O.

When it I really do think that you know in this great rush. This great resignation, where there was this mad dash for talent.

Recruiters were the hardest people to recruit.

In their organizations and companies you've seen the stories about them.

I am sure, particularly in the technology for technology companies and I think that organizations really staffed up.

For for growth and scale.

Bob Rozek: Well, that's for sure. I mean, it is definitely more artwork for sure to try to triangulate to that. I think getting that exact percentage is very, very hard to do, but I do think we do need to stick to the upper end of that market. I think that's where we have the most revenue synergy and the ability for cross referrals and the ability to feed into our global you know, marquee and regional accounts.

And I think there is.

It's clearly companies have pulled back.

And rather than downsizing.

For example in the HR area as an example, not to pick on that but rather than down sourcing.

And they're taking that reduced.

That reduced capacity that reduced demand and filling in internal it.

And that's that's clearly.

What's happened and Theres been no other change.

<unk> landscape and so.

You know as I said earlier the last couple of years, we've done $600 million of new business as Bob pointed out, it's very very lumpy quarter to quarter, what I expect 600. This year no I wouldn't expect 600.

Bob Rozek: You know, we look at the total addressable market for corn fairy at, you know, $250, $300 billion. And the two big pieces of that would be number one around training, learning, development. Today for corn fairy, that's probably 10, 11, 12% of the firm. I think we're completely undersized in what that can be. We develop over a million professionals a year. I think that's a big opportunity. The other big part of that market would be what's generally referred to as staffing.

But what I expect 525, yeah, I'd expect 525.

Thank you very much.

And Mr. <unk>. It appears there are no further questions.

Okay, Greg everybody. Thanks for taking thanks for taking the time and.

We look forward to speaking to you over the next few days and thanks again bye bye.

Ladies and gentlemen, this conference call will be available for replay for one week starting today at three P. M. Eastern time running through the day September 14th 2023, ending at Midnight you may access the AT&T executive playback service by dialing 866207104.

Bob Rozek: I think we would need to stick at the very, very high end of that. So just rough numbers. I mean, if you think that the addressable market for corn fairy is $250, $300 billion. I mean, you know, the market better than I. But I think that that billion dollars would still be a relatively small percentage of the high end of that market for sure. But we have to stick at that high end.

One and entering the access code 3900121 International participants may dial four zero to 90 700847. Additionally, the replay will be available for playback at the company's website Www Dot Korn ferry dot com in the Investor Relations section.

Bob Rozek: I do not see us going down. We don't enjoy the revenue synergy and the revenue uplift. So our view now is to stick with technology, finance and accounting, operations supply chain, and HR. And when you look at that interim business today, it's predominantly in the United States, and so you would also have to say, Korn-Ferry would, you know, needs to be looking at other places in the world where there's clearly opportunity. But, you know, we're very mindful of that question and the implication and where we should really be playing that.

That does conclude your conference for today. Thank you for your participation and for using AT&T teleconference. You may now disconnect.

Bob Rozek: It's a good insight, good question, and certainly one that we consider pretty seriously, for sure.

Toby Sommer: Thank you.

Bob Rozek: If I speak one last one in, I'd like you to expand on your comment about an in-sourcing trend impacting RPO. How do you think that will evolve and is there evidence of recruiting in-sourcing sort of a reaction to the high, the great resignation and is it impacting or do you think it may any other aspects of your business in the market? No, I think it's, you know, we're seeing it really within RPO and I, you know, when I really do think that, you know, in this great rush, this great resignation, where there was this mad dash for talent, recruiters were the hardest people to recruit in the organizations and companies.

Bob Rozek: You've seen the stories about them. I'm sure, particularly in the technology for technology companies. And I think that organizations really stacked up for growth and scale and I think there is, you know, clearly companies have pulled back. And rather than downsizing, you know, for example, in the HR area, as an example, not to pick on that, but rather than been down sourcing, they're taking that reduced capacity, that reduced the man and filling it internally.

Bob Rozek: And that's clearly what's happened and there's been no other change in the RPO landscape. And so I, you know, as I said earlier, the last couple years, we've done $600 million of new businesses, Bob pointed out it's very, very lumpy quarter to quarter. Would I expect 600 this year? No, I wouldn't expect 600, but would I expect 525? Yeah, I'd expect 525.

Bob Rozek: Thank you very much.

Operator: And Mr. Bernerson, it appears there are no further questions. Okay, Greg, everybody, thanks for taking the time and we look forward to speaking to you over the next few days. And thanks again. Bye-bye. Ladies and gentlemen, this conference call will be available for replay for one week, starting today at 3 p.m. Eastern Time, running through the day September 14, 2023, ending at midnight. You may access the AT&T Executive Playback Service by dialing 866-207-1041 and entering the access code 390-0121. International participants may dial 402-970-0847. Additionally, the replay will be available for playback at the company's website www.cornferry.com in the investor relations section.

Operator: That does conclude your conference for today. Thank you for your participation and for using AT&T Teleconference. You may now disconnect.