Q3 2026 Korn Ferry Earnings Call

March 9, 2026

Speaker #1: Ladies and gentlemen, thank you for standing by, and welcome to the Korn Ferry third-quarter fiscal year 2026 conference call. At this time, all participants are in listen-only mode.

Speaker #1: Following 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 KORNFERRY.com, a copy of the financial presentation that we will be reviewing with you today.

Speaker #1: 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 Securities Litigation Reform Act of 1995.

Speaker #1: Although the company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, investors are cautioned not to place undue reliance on such statements.

Operator: Although the company believes that 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 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 2025 and in the company's soon-to-be-filed quarterly report for the quarter ended 31 January 2026. Some of the comments today may reference non-GAAP financial measures such as constant currency amounts, EBITDA, and adjusted EBITDA.

Speaker #1: Actual results and 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.

Speaker #1: 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 2025 and in the company's soon-to-be-filed quarterly report for the quarter ended January 31, 2026.

Speaker #1: 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 measures, 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.kornferry.com.

Operator: Additional information concerning these measures, including reconciliations to the most directly comparable GAAP financial measures, 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.kornferry.com. With that, I'll turn the call over to Mr. Burneson. Please go ahead, Mr. Burneson.

Speaker #1: With that, I'll turn the call over to Mr. Burnison. Please go ahead, Mr. Burnison.

Gary Burnison: Okay. Thank you, Regina, and thank you everybody for joining us. Our outstanding performance during the quarter reflects the ongoing evolution of our firm from One Korn Ferry to We Are Korn Ferry. Fundamentally, our purpose is to enable people and organizations to be more than. You know, as I reflect on all the recent conversations surrounding AI and disintermediation, it strikes me that the question isn't simply will AI take away jobs? The fact is there won't be enough workers. The prism we need to look through is of a stark imbalance in labor supply. While there may be fewer jobs compared to the last couple decades, there'll also be a lot less people in the labor force. Let's be clear on what this means. It's not simply that AI will take away your jobs.

Speaker #2: Okay. Thank you, Regina, and thank you, everybody, for joining us. Our outstanding performance during the quarter reflects the ongoing evolution of our firm. From 'one Korn Ferry' to 'we are Korn Ferry.'

Speaker #2: Fundamentally, our purpose is to enable people and organizations to be more than. As I reflect on all the recent conversations surrounding AI and disintermediation, it strikes me that the question isn't simply: Will AI take away jobs?

Speaker #2: The fact is, there won't be enough workers. The prism we need to look through is a stark imbalance in labor supply. So, while there are maybe fewer jobs compared to the last couple of decades, there will also be a lot less people in the labor force.

Speaker #2: And let's be clear on what this means. It's not simply that AI will take away your job. It's that those not embracing technology and AI will be left out.

Gary Burnison: It's that those not embracing technology and AI will be left out. Today, the world is enveloped by unprecedented levels of change, ripple effects from the pandemic, aging demographics, and technological advancement from something out of Star Wars. All of which is converging to exert greater impact on the way people live, work, and consume. For example, birth rates in the US have been falling since the late 1960s. They've essentially been cut by more than half in each year. 10,000 baby boomers are retiring every day. That's 4 million a year for the next several years. Over the next 10 years, labor force participation is forecasted to decline further. Today, it's already lower than pre-COVID levels. As the labor force gets smaller, technology or immigration will need to fill the gap between supply and demand to maintain economic growth.

Speaker #2: Today, the world is enveloped by unprecedented levels of change. Ripple effects from the pandemic, aging demographics, and technological advancement from something out of Star Wars.

Speaker #2: All of which is converging to exert greater impact on the way people live, work, and consume. For example, birth rates in the U.S. have been falling since the late 1960s.

Speaker #2: They've essentially been cut by more than half in each year. 10,000 baby boomers are retiring every day. That's 4 million a year for the next several years.

Speaker #2: Over the next 10 years, labor force participation is forecasted to decline further. And today, it's already lower than pre-COVID levels. As the labor force gets smaller, technology or immigration will need to fill the gap between supply and demand to maintain economic growth.

Gary Burnison: AI will absolutely play a critical role. At Korn Ferry, we're at the forefront of working directly with global decision-makers who are grappling with these issues as they seek answers to creating and sustaining a high-performing workforce. The outliers of achievement and performance are gonna be more in demand, not less in demand. The need for highly skilled, agile talent will only increase. It'll be more critical than ever to identify the 20% doing the 80%. Companies must identify, hire, develop, and retain the scarce, experienced professionals needed to lead this transformation, which invariably means doing more with less. When we look at our own business and our clients, it supports this macroeconomic thesis. Internally, we have become far more efficient and productive. Over the last 3 years, revenue is up and costs are down.

Speaker #2: And AI will absolutely play a critical role. And at Korn Ferry, we're at the forefront of working directly with global decision-makers who are grappling with these issues.

Speaker #2: As they seek answers to creating and sustaining a high-performing workforce, the outliers of achievement in performance are going to be more in demand, not less in demand.

Speaker #2: The need for highly skilled agile talent will only increase. It will be more critical than ever to identify the 20% doing the 80%. Companies must identify, hire, develop, and retain the scarce, experienced professionals needed to lead this transformation.

Speaker #2: Which invariably means doing more with less. And when we look at our own business and our clients, it supports this macroeconomic thesis. Internally, we have become far more efficient and productive.

Speaker #2: Over the last three years, revenue is up and costs are down. Our revenue per headcount has increased by almost a third. As a result, we are more profitable and we've grown our margins by more than 300 basis points.

Gary Burnison: Our revenue per head count has increased by almost a third. As a result, we are more profitable and we've grown our margins by more than 300 basis points. We're continuing to drive a major transformation from One Korn Ferry to We Are Korn Ferry. What does it mean? Well, it means that we're not 5 businesses. We're 1 business with 5 solutions and 9,000 colleagues, all with a unified mindset. It begins with client centricity, deepening our solutions with our existing clients to unlock growth. We've got more than 10,000 clients around the world, but 4,500 of those represent 90% of our revenue. When I look at that set of clients, our penetration is only 1.5 or 2 solutions per client for two-thirds of the 4,500 clients.

Speaker #2: And we're continuing to drive a major transformation. From one Korn Ferry to 'We are Korn Ferry.' What does it mean? Well, it means that we're not five businesses.

Speaker #2: We're one business with five solutions, and 9,000 colleagues all with a unified mindset. And it begins with client centricity—deepening our solutions with our existing clients to unlock growth.

Speaker #2: We've got more than 10,000 clients around the world. But 4,500 of those represent 90% of our revenue. And when I look at that set of clients, our penetration is only one and a half or two solutions per client for two-thirds of the 4,500 clients.

Gary Burnison: That means there's a lot of runway to deepen the relationship. With We Are Korn Ferry, we are taking a top-down and bottom-up systematic process to tap this growth opportunity. Our market accounts again outperform the portfolio, up 9%, contributing 40% of our overall total revenue. Our cross-business referrals are now at a near high of 27% of our business. At the top of the house, our work has never been more impactful. Recently, a well-known TV broadcast highlighted seven major CEO transitions over the last few months, and we were involved in six of them. Further reflecting our client centricity, we've won several significant transformation engagements across the globe. A major aerospace and defense company is one of our first end-to-end Talent Suite customers, utilizing our proprietary data to make better talent decisions across 40,000 plus employees.

Speaker #2: That means there's a lot of runway to deepen the relationship. So with we are Korn Ferry, we are taking a top-down and bottom-up systematic process to tap this growth opportunity.

Speaker #2: Our marketing accounts, again, outperform the portfolio—up 9%, contributing 40% of our overall total revenue. Our cross-business referrals are now at a near high of 27% of our business.

Speaker #2: And at the top of the house, our work has never been more impactful. Recently, a well-known TV broadcast highlighted seven major CEO transitions over the last few months.

Speaker #2: And we were involved in six of them. Further reflecting our clients' centricity, we've won several significant transformation engagements across the globe. A major aerospace and defense company is one of our first end-to-end talent suite customers.

Speaker #2: Utilizing our proprietary data to make better talent decisions across 40,000-plus employees. This is a multi-year talent suite engagement. For me, talent suite isn't a product.

Gary Burnison: This is a multiyear Talent Suite engagement. For me, Talent Suite isn't a product. It's Moneyball for business based on data beyond compare. It gives clients decades of insight of what separates great from good, and it powers the entire firm. At one of the top financial institutions in the world, with nearly 100,000 employees, we're supporting a new enterprise-wide talent excellence program, incorporating our world-class assessment capability and Leadership Accelerator programs. Finally, we're proud to be a founding partner of the LA28 Olympic and Paralympic Games, powering the people who power the games. We're not only building their C-suites, but also helping them design the organization and hiring the nearly 5,000 people who will perform on the world's most inspiring stage. With that, I will turn it over to Bob Rozek. Bob, go ahead.

Speaker #2: It's Moneyball for business, based on data beyond compare. It gives clients decades of insight into what separates great from good. And it powers the entire firm.

Speaker #2: At one of the top financial institutions in the world, with nearly 100,000 employees, we're supporting a new enterprise-wide talent excellence program. We’re incorporating our world-class assessment capability and leadership accelerator programs.

Speaker #2: And finally, we're proud to be a founding partner of the LA28 Olympic and Paralympic Games—powering the people who power the Games. We're not only building their C-suite, but also helping them design the organization and hiring the nearly 5,000 people who will perform on the world's most inspiring stage.

Speaker #2: With that, I will turn it over to Bob Rozek. Bob, go ahead.

Robert Rozek: Great. Thanks, Gary, and good afternoon or good morning. We're very pleased with our Q3 results. This is our fifth consecutive quarter of accelerating year-over-year fee revenue growth, and we continue to deliver earnings growth, driving strong profitability and free cash flow. Our go-to-market approach continues to be intentional and focused on opportunities where we can build broader relationships with clients by selling larger integrated solutions that support their evolving talent issues. Now, what's really impressive is we are doing this in an environment where business conditions and labor markets remain challenged. It is very clear that our strategy is working, and our results demonstrate that we have built a company that is different from others in the industry. We perform differently because we are different. Now turning to overall company results comparing Q3 of FY '26 to Q3 of FY '25.

Bob Rozek: Great. Thanks, Gary, and good afternoon or good morning. We're very pleased with our Q3 results. This is our fifth consecutive quarter of accelerating year-over-year fee revenue growth, and we continue to deliver earnings growth, driving strong profitability and free cash flow. Our go-to-market approach continues to be intentional and focused on opportunities where we can build broader relationships with clients by selling larger integrated solutions that support their evolving talent issues. Now, what's really impressive is we are doing this in an environment where business conditions and labor markets remain challenged. It is very clear that our strategy is working, and our results demonstrate that we have built a company that is different from others in the industry. We perform differently because we are different. Now turning to overall company results comparing Q3 of FY '26 to Q3 of FY '25.

Speaker #1: Great, thanks, Gary, and good afternoon or good morning. We're very pleased with our third-quarter results. This is our fifth consecutive quarter of accelerating year-over-year fee revenue growth.

Speaker #1: And we continue to deliver earnings growth, driving strong profitability and free cash flow. Our go-to-market approach continues to be intentional and focused on opportunities where we can build broader relationships with clients by selling larger integrated solutions that support their evolving talent issues.

Speaker #1: Now, what's really impressive is we are doing this in an environment where business conditions and labor markets remain challenged. It is very clear that our results demonstrate that we have built a company that is different from others in the industry.

Speaker #1: We perform differently because we are different. Now, turning to overall company results, comparing Q3 of FY26 to Q3 of FY25, our consolidated fee revenue grew 7% to $717 million—again, our fifth consecutive quarter of accelerating year-over-year growth.

Robert Rozek: Our consolidated fee revenue grew 7% to $717 million. Again, our fifth consecutive quarter of accelerating year-over-year growth. Earnings continued to grow in line with fee revenue, and profitability remained strong. Adjusted EBITDA grew $9 million or 7.5% to $123 million. Our adjusted EBITDA margin was 17.2%, up 10 basis points, and adjusted diluted earnings per share grew $0.09 or 8% to $1.28. Total company new business, excluding RPO, grew 11% with both consulting and digital reaching all-time quarterly highs. RPO delivered $54 million of new business in the quarter, with 78% coming from new logos and 22% from renewals. Estimated remaining fees under existing contracts at the end of the quarter were $1.85 billion.

Bob Rozek: Our consolidated fee revenue grew 7% to $717 million. Again, our fifth consecutive quarter of accelerating year-over-year growth. Earnings continued to grow in line with fee revenue, and profitability remained strong. Adjusted EBITDA grew $9 million or 7.5% to $123 million. Our adjusted EBITDA margin was 17.2%, up 10 basis points, and adjusted diluted earnings per share grew $0.09 or 8% to $1.28. Total company new business, excluding RPO, grew 11% with both consulting and digital reaching all-time quarterly highs. RPO delivered $54 million of new business in the quarter, with 78% coming from new logos and 22% from renewals. Estimated remaining fees under existing contracts at the end of the quarter were $1.85 billion.

Speaker #1: Earnings continue to grow in line with fee revenue, and profitability remains strong. Just at EBITDA, grew $9 million, or 7.5%, to $123 million.

Speaker #1: Our adjusted EBITDA margin was 17.2%. It's up 10 basis points. And adjusted diluted earnings per share grew 9 cents, or 8%, to $1.28.

Speaker #1: Total company new business, excluding our PO, grew 11%, with both Consulting and Digital reaching all-time quarterly highs. Our PO delivered $54 million of new business in the quarter, with 78% coming from new logos and 22% from renewals.

Speaker #1: Estimated remaining fees under existing contracts at the end of the quarter were $1.85 billion; that's up 11% year-over-year. And we estimate that approximately 60%, or about $1.1 billion, will be recognized within the next year, with the remaining 40%, or about $734 million, estimated to be recognized beyond the next four quarters.

Robert Rozek: That's up 11% year-over-year. We estimate that approximately 60%, or about $1.1 billion, will be recognized within the next year, with the remaining 40% or about $734 million estimated to be recognized beyond the next 4 quarters. Finally, our capital allocation during Q3 remained balanced. Through the end of Q3, we have returned about $113 million to shareholders through combined share repurchases and dividends, and we've invested $64 million back into capital expenditures focused on Talent Suite, productivity tools, and other solution and product enhancements. In a separate announcement last week, our board has approved a 15% increase in our quarterly cash dividend to $0.55 per share. That's our 7th dividend increase in the last 6 years.

Bob Rozek: That's up 11% year-over-year. We estimate that approximately 60%, or about $1.1 billion, will be recognized within the next year, with the remaining 40% or about $734 million estimated to be recognized beyond the next 4 quarters. Finally, our capital allocation during Q3 remained balanced. Through the end of Q3, we have returned about $113 million to shareholders through combined share repurchases and dividends, and we've invested $64 million back into capital expenditures focused on Talent Suite, productivity tools, and other solution and product enhancements. In a separate announcement last week, our board has approved a 15% increase in our quarterly cash dividend to $0.55 per share. That's our 7th dividend increase in the last 6 years.

Speaker #1: And finally, our capital allocation during the quarter remained balanced. Through the end of the third quarter, we have returned about $113 million to shareholders through combined share repurchases and dividends, and we've invested $64 million back into capital expenditures focused on Talent Suite, productivity tools, and other solution and product enhancements.

Speaker #1: In a separate announcement last week, our board has approved a 15% increase in our quarterly cash dividend to $0.55 per share, and that's our seventh dividend increase in the last six years.

Robert Rozek: Our cash flow remains strong, and we are confident in the outlook for our business. In addition to the detailed results found in our posted earnings presentation, here are a few company-wide and solution-specific highlights for Q3. You saw fee revenue growth was very broad-based across all solutions. The interim portion of our PS&I solution grew 4%, continuing to benefit from new business referrals, which were a key factor driving our outperformance in an industry that has been challenged for more than 36 months. Our new business referrals and Marquee Diamond account program continue to be contributors of growth enabled by our We Are Korn Ferry go-to-market initiative.

Bob Rozek: Our cash flow remains strong, and we are confident in the outlook for our business. In addition to the detailed results found in our posted earnings presentation, here are a few company-wide and solution-specific highlights for Q3. You saw fee revenue growth was very broad-based across all solutions. The interim portion of our PS&I solution grew 4%, continuing to benefit from new business referrals, which were a key factor driving our outperformance in an industry that has been challenged for more than 36 months. Our new business referrals and Marquee Diamond account program continue to be contributors of growth enabled by our We Are Korn Ferry go-to-market initiative.

Speaker #1: Our cash flow remains strong, and we are confident in the outlook for our business. In addition to the detailed results found in our posted earnings presentation, here are a few company-wide and solution-specific highlights for the third quarter.

Speaker #1: You saw fee revenue growth was very broad-based across all solutions. The interim portion of our PS&I solution grew 4%, continuing to benefit from new business referrals, which were a key factor driving our outperformance in an industry that has been challenged for more than 36 months.

Speaker #1: Our new business referrals and marquee diamond account program continue to be contributors of growth enabled by our We Are Korn Ferry go-to-market initiative. As Gary mentioned, new business referrals account for 27.2% of our consolidated fee revenue, and that's up 200 basis points year-over-year. The marquee and diamond accounts continued to be strong at 40% of our total fee revenue.

Robert Rozek: As Gary mentioned, new business referrals accounted for 27.2% of our consolidated fee revenue. That's up 200 basis points year-over-year. The Marquee and Diamond accounts continued to be strong at 40% of our total fee revenue. Also in Q3, subscription and licensed new business grew 30% year-over-year and accounted for 43% of digital's total new business. Additionally, in the Q3, subscription and license fee revenue grew 8%. Finally, our average hourly bill rates for consulting and interim grew by 2% and 15% respectively. Again, demonstrating the high value our clients place on these solutions. Now turning to our regions. Fee revenue in the Americas was up 6%, led by growth in executive search and RPO.

Bob Rozek: As Gary mentioned, new business referrals accounted for 27.2% of our consolidated fee revenue. That's up 200 basis points year-over-year. The Marquee and Diamond accounts continued to be strong at 40% of our total fee revenue. Also in Q3, subscription and licensed new business grew 30% year-over-year and accounted for 43% of digital's total new business. Additionally, in the Q3, subscription and license fee revenue grew 8%. Finally, our average hourly bill rates for consulting and interim grew by 2% and 15% respectively. Again, demonstrating the high value our clients place on these solutions. Now turning to our regions. Fee revenue in the Americas was up 6%, led by growth in executive search and RPO.

Speaker #1: Also, in the third quarter, subscription and licensed new business grew 30% year-over-year and accounted for 43% of Digital’s total new business. Additionally, in the third quarter, subscription and licensed fee revenue grew 8%.

Speaker #1: And finally, our average hourly bill rates for consulting and interim grew by 2% and 15%, respectively, again demonstrating the high value our clients place on these solutions.

Speaker #1: Now, turning to our regions, fee revenue in the Americas was up 6%, led by growth in executive search and RPO. EMEA fee revenue continued to be strong, growing 13% with double-digit growth in executive search, consulting, digital, and PS&I. APAC fee revenue declined slightly at 2%, with growth in executive search being offset by modest weakness in other solutions.

Robert Rozek: EMEA fee revenue continued to be strong, growing 13% with double-digit growth in executive search, consulting, digital, and PS&I. APAC fee revenue declined slightly at 2%, with growth in executive search being offset by modest weakness in other solutions. Now turning to our outlook for Q4 of FY '26, assuming no material negative impact from the recent Middle East conflict.

Bob Rozek: EMEA fee revenue continued to be strong, growing 13% with double-digit growth in executive search, consulting, digital, and PS&I. APAC fee revenue declined slightly at 2%, with growth in executive search being offset by modest weakness in other solutions. Now turning to our outlook for Q4 of FY '26, assuming no material negative impact from the recent Middle East conflict.

Speaker #1: Now, turning to our outlook for the fourth quarter of fiscal '26, assuming no material negative impact from the recent Middle East conflict, and no further changes in worldwide geopolitical conditions, economic conditions, financial markets, and foreign exchange rates, we expect fee revenue in the fourth quarter to range from $730 million to $750 million.

Gary Burnison: No further changes in worldwide geopolitical conditions, economic conditions, financial markets, and foreign exchange rates. We expect fee revenue in Q4 to range from $730 million to $750 million. Our adjusted EBITDA margin to range from 17.1% to 17.3%, and our consolidated adjusted diluted earnings per share, as well as our GAAP diluted earnings per share, to range from $1.34 to $1.40. Now in closing, our financial results over the last five quarters demonstrate that our unique combination of foundational assets, expertise, and capabilities truly matter to our clients. Looking to the future, I'm very excited about our opportunities to drive continued top-line growth. You heard Gary talk about our top 4,500 clients.

Bob Rozek: No further changes in worldwide geopolitical conditions, economic conditions, financial markets, and foreign exchange rates. We expect fee revenue in Q4 to range from $730 million to $750 million. Our adjusted EBITDA margin to range from 17.1% to 17.3%, and our consolidated adjusted diluted earnings per share, as well as our GAAP diluted earnings per share, to range from $1.34 to $1.40. Now in closing, our financial results over the last five quarters demonstrate that our unique combination of foundational assets, expertise, and capabilities truly matter to our clients. Looking to the future, I'm very excited about our opportunities to drive continued top-line growth. You heard Gary talk about our top 4,500 clients.

Speaker #1: Our adjusted EBITDA margin is expected to range from 17.1% to 17.3%. And our consolidated adjusted diluted earnings per share, as well as our GAAP diluted earnings per share, are expected to range from $1.34 to $1.40.

Speaker #1: Now, in closing, our financial results over the last five quarters demonstrate that our unique combination of foundational assets, expertise, and capabilities truly matter to our clients.

Speaker #1: Looking to the future, I'm very excited about our opportunities to drive continued top-line growth. You heard Gary talk about our top 4,500 clients. With the rollout of Talent Suite and our We Are Korn Ferry initiative, we continue to see significant opportunity to expand those relationships in what we call the green space.

Gary Burnison: With the rollout of Talent Suite and our We Are Korn Ferry initiative, we continue to see significant opportunity to expand those relationships in what we call the green space. That is horizontal expansion, where we bring additional solutions to our clients. Vertical expansion, where we leverage our strong C-suite relationships and provide solutions at scale to what we call the vital many, and that's down into an organization's professional ranks. We have a great playbook to run from, our Marquee and Diamond accounts, where we have a strong track record of successfully expanding those relationships. I also see further opportunities in our joint go-to-market activities, particularly between consulting and digital. As I've said many times before on these calls, I am more convinced than ever that our best is yet to come. With that, we would be glad to answer any questions you may have.

Bob Rozek: With the rollout of Talent Suite and our We Are Korn Ferry initiative, we continue to see significant opportunity to expand those relationships in what we call the green space. That is horizontal expansion, where we bring additional solutions to our clients. Vertical expansion, where we leverage our strong C-suite relationships and provide solutions at scale to what we call the vital many, and that's down into an organization's professional ranks. We have a great playbook to run from, our Marquee and Diamond accounts, where we have a strong track record of successfully expanding those relationships. I also see further opportunities in our joint go-to-market activities, particularly between consulting and digital. As I've said many times before on these calls, I am more convinced than ever that our best is yet to come. With that, we would be glad to answer any questions you may have.

Speaker #1: That is horizontal expansion, where we bring additional solutions to our clients; vertical expansion, where we leverage our strong C-suite relationships and provide solutions at scale to what we call the vital many—that's down into an organization's professional ranks.

Speaker #1: We have a great playbook to run from—our marquee and diamond accounts, where we have a strong track record of successfully expanding those relationships.

Speaker #1: I also see further opportunities in our joint go-to-market activities, particularly between Consulting and Digital. And as I've said many times before on these calls, I am more convinced than ever that our best is yet to come.

Speaker #1: With that, we would be glad to answer any questions you may have.

Operator: We will now begin the question-and-answer session. To ask a question, press star then 1 on your telephone keypad. Our first question will come from the line of Tobey Sommer with Truist Securities. Please go ahead.

Speaker #2: We will now begin the question-and-answer session. To ask a question, press star, then the number 1 on your telephone keypad. Our first question will come from the line of Toby Summer with Truist Securities.

Speaker #2: Please go ahead.

Tobey Sommer: Thank you. Markets are certainly reacting to a number of potential outcomes as a result of AI. How do you see AI impacting Korn Ferry?

Speaker #3: Thank you. So, markets are certainly reacting to a number of potential outcomes as a result of AI. How do you see AI impacting Korn Ferry?

Gary Burnison: Well, I think it's going to at the end of the day, it's gonna allow us to drive more efficiency, as we've done over the last three years, number one. Number two, you know, where we play, we're playing at the high end. Yeah, the high end of the labor force. I mean, you know, take the United States, there's only, you know, 25,000 companies that have 1,000 employees or more. When I look at the US labor force today of 171 million and really look through the categories of talent, Korn Ferry, and its clients, are very much at the high end. I don't, I don't really see that high-end labor talent being disintermediated.

Speaker #4: Well, I think it's going to, at the end of the day, it's going to allow us to drive more efficiency, as we've done over the last three years—number one.

Speaker #4: And number two, where we play, we're playing at the high end. And the high end of the labor force. I mean, take the United States.

Speaker #4: There are only 25,000 companies that have 1,000 employees or more. And so when I look at the U.S. labor force today of 171 million, and really look through the categories of talent, Korn Ferry and its clients are very much at the high end.

Speaker #4: And so, I don't really see that high-end labor talent being disintermediated. And so, I believe long term that it's actually going to create more opportunity for us, not just in efficiency and how we deliver services, but also in terms of our client solutions and delivery.

Gary Burnison: I believe long term, that it's actually gonna create more opportunity for us, not just in efficiency and how we deliver services, but also in terms of our client solutions and delivery. I mean, we've got a number of engagements where we're using what we have as proprietary AI-Ready Leadership assessment tool, and we're using that through the Talent Suite to help companies transform their workforce. You know, I just look at the numbers in the labor force and, you know, over the last 20 years, the US labor force has created, you know, something like 20 to 25 million jobs. Over the next 10 years, it's estimated to be 5 million. Last year, we produced as a country, very few jobs.

Speaker #4: I mean, we've got a number of engagements where we're using what we have as a proprietary AI-ready leadership assessment tool. And we're using that through the talent suite to help companies transform their workforce.

Speaker #4: So look, I just look at the numbers. In the labor force, and over the last 20 years, the U.S. labor force has created something like 20 to 25 million jobs.

Speaker #4: Over the next 10 years, it's estimated to be 5 million. And last year, we produced, as a country, very, very few jobs. And so I think you've got this huge imbalance between the demand and supply of labor that either has to get filled through immigration or technology.

Gary Burnison: I think you've got this huge imbalance between the demand and supply of labor that either has to get filled through immigration or technology. I would say it's gonna be heavily on technology. For me, it's not, you know, it's not a simple question that AI will take away jobs. It's the people that don't embrace AI, they're gonna be left out. So, you know, look, this is early days and when we talk to most clients, truthfully, they haven't fully figured out how to use AI to drive efficiency. When I look at the demographic trends, it's quite clear that companies are gonna have to do more with less. It's a, you know, it's mathematics around demographics.

Speaker #4: And I would say it's going to be heavily on technology. So, for me, it's not a simple question that AI will take away jobs.

Speaker #4: It's the people that don't embrace AI—they're going to be left out. So, look, this is early days. And when we talk to most clients, truthfully, they haven't fully figured out how to use AI to drive efficiency.

Speaker #4: But when I look at the demographic trends, it's quite clear that companies are going to have to do more with less. It's a mathematics around demographics.

Tobey Sommer: In that context, I want to just double-click. If we had a higher or an increase in unemployment, do you think the company can grow in that kind of environment Typically used to be characterized or would reflect an economic recession? Maybe it would or maybe it won't in this, if AI goes to the nth degree as some are thinking.

Speaker #3: And in that context, I want to just double-click it. If we have a higher—or an increase—in unemployment, do you think the company can grow in that kind of environment? That typically used to be characterized, or would reflect, an economic recession. Maybe it would, or maybe it won't in this—if AI goes to the nth degree, as some are thinking.

Gary Burnison: Well, we're trying, you know. I mean, this is my 95th earnings call, quarterly earnings call. You know, many years ago, the company was dependent on 1 solution, which was executive search. That was directly tied not only to the stock market with a high correlation, but to unemployment and what was happening in the labor force. Today, you've got a much more diversified business, with 5 different solutions. I think we've demonstrated over the last 36 months, which I consider a labor recession, that there's quarters that 1 solution is up and another is down.

Speaker #4: Well, we're trying. I mean, this is my 95th quarterly earnings call. And many years ago, the company was dependent on one solution, which was executive search.

Speaker #4: And that was directly tied not only to the stock market, with a high correlation, but to unemployment and what was happening in the labor force.

Speaker #4: Today, you've got a much more diversified business with five different solutions. And I think we've demonstrated over the last 36 months, which I consider a labor recession, that there are quarters when one solution is up and another is down.

Gary Burnison: The thing that's very interesting is when you look at the executive search solution and you think about the labor market over the last, you know, 36 months, you would have expected, based on, you know, historical data going back many years, that the executive search solution would actually be down, when in fact, it's the opposite. I think that tells you part of the story there is around demographics. I mean, clearly it's around the strategy. There's no doubt about that. It's also reflective of demographics.

Speaker #4: And the thing that's very interesting is, when you look at the Executive Search solution and you think about the labor market over the last 36 months, you would have expected, based on historical data going back many years, that the Executive Search solution would actually be down.

Speaker #4: When in fact, it's the opposite. And so I think that tells you part of the story there is around demographics. I mean, clearly, it's around the strategy.

Speaker #4: There's no doubt about that. But it's also reflective of demographics. It's reflective of post-COVID life. And it's reflective of boards looking at leadership teams and saying, 'Hey, what got you here isn't going to get you there.' And then people are making choices about opting out of the labor force, because most of those people in the C-suite were leading businesses during COVID.

Gary Burnison: It's reflected of post-COVID life, it's reflective of boards looking at leadership teams and saying, Hey, you know, what got you here isn't going to get you there. I think people are making choices about opting out of the labor force because most of those people in the C-suite were leading businesses during COVID. Maybe it's work-life balance. But there is something going on here that's interesting. I look at it and say, our clients, the people that are making decisions around us are truly the outliers of achievement. I don't look at it and think, oh, my God, you know, out of 171 million people in the labor force, 20 million are in management roles.

Speaker #4: And so maybe it's work-life balance. But there is something going on here that's interesting. And I look at it and say, 'Our clients, the people that are making decisions around us, are truly the outliers of achievement.' And I just don't look at it and think, 'Oh my God, out of 171 million people in the labor force, 20 million are in management roles.' I just don't see that they're going to be wiped out here.

Gary Burnison: I just don't see that they're gonna be wiped out here. I, you know, we have not disintermediated humanity.

Speaker #4: We have not disintermediated humanity.

Tobey Sommer: Okay. Thank you very much. If I could ask one more, and I'll get back in the queue. With respect to Talent Suite, do you think that is more likely to have the biggest impact deepening existing relationships, making them stickier somehow? Or is it more about expanding into new customer relationships? I'm sure there's an element of both, but, you know, if you had to choose, which way would you, which way would you go?

Speaker #3: Okay, thank you very much. If I could ask one more, and I'll get back in the queue. With respect to Talent Suite, do you think that is more likely to have the biggest impact deepening existing relationships—making them stickier somehow—or is it more about expanding into new customer relationships?

Speaker #3: And I'm sure there's an element of both, but if you had to choose, which way would you go?

Gary Burnison: I think it's the former. The thing where there's incredible, and we've been working now for 12 months on We Are Korn Ferry. The crux of it when you look at it, there's 4,500 clients that represent 90% of our revenue. When you look at that client base, what you're gonna find is that, you know, you look at 2/3 of them, and we're only doing 1.5 or 2 solutions. I look at Talent Suite as not a digital solution play. I look at it as empowering the entire firm. Ultimately, the goal is to try to infuse Korn Ferry's language of talent in the companies, how they hire, how they design an organization, how they retain, how they pay, how they develop.

Speaker #4: I think it's the I think it's the former. The thing that the thing where there's incredible and we've been working now for it's 12 months.

Speaker #4: On We Are KORN FERRY. And the crux of it, when you look at it, there's 4,500 clients that represent 90% of our revenue. And when you look at that client base, what you're going to find is that if you look at two-thirds of them, we're only doing one and a half or two solutions.

Speaker #4: So I look at Talent Suite as not a digital solution play. I look at it as empowering the entire firm. And ultimately, the goal is to try to infuse Korn Ferry's language of talent into companies—how they hire, how they design an organization, how they retain, how they pay, how they develop.

Gary Burnison: I look at it much broader, but the goal absolutely is a little bit like a Trojan horse to embed the language of client. Then when it comes to the digital solution in Talent Suite, the reality is we've probably got about, you know, 6,000 clients on Talent Suite, something like that. When you look at that, what you're gonna find is that 70% of them are only using one product within Talent Suite. There's enormous opportunity there. For me, it comes down to having a systematic approach on the go-to-market side and having client service teams that are targeting and servicing the world's biggest companies.

Speaker #4: So, I look at it much broader. But the goal absolutely is a little bit like a Trojan horse—to embed the language of client.

Speaker #4: And then, when it comes to the Digital Solution and Talent Suite, the reality is we've probably got about 6,000 clients on Talent Suite, something like that.

Speaker #4: And when you look at that, what you're going to find is that 70% of them are only using one product within the talent suite. And so there's enormous opportunity there.

Speaker #4: So, for me, it comes down to having a systematic approach on the go-to-market side, and having client service teams that are targeting and servicing the world's biggest companies.

Tobey Sommer: Thank you very much.

Speaker #3: Thank you very much.

Operator: Our next question will come from the line of Trevor Romeo with William Blair. Please go ahead.

Speaker #1: Our next question will come from the line of Trevor Romeo with William Blair. Please go ahead.

Trevor Romeo: Hi, good morning. Thank you for taking the questions. Maybe I'll just follow up on the TalentSuite discussion. Did it look like your fees under contract were up double digits for both consulting and digital? I think your subscription and license fee revenue, and the new business also accelerated. Would you attribute any of that to, I guess, you know, very early returns from TalentSuite? Is it already having an impact? Or if not, maybe you could speak to what drove that because it seems like a pretty meaningful acceleration for both of those solutions.

Speaker #3: Good morning. Thank you for taking the questions. Maybe I'll just follow up on the talent suite discussion. Does it look like your fees under contract were up double digits for both Consulting and Digital?

Speaker #3: I think your subscription and license fee revenue and the new business also accelerated. So would you attribute any of that to, I guess, very early returns from the talent suite?

Speaker #3: Is it already having an impact? Or, if not, maybe you could speak to what drove that, because it seems like a pretty meaningful acceleration for both of those solutions.

Gary Burnison: Yeah, we had a killer, you know, we had a killer couple of months in the quarter of new business. Again, the strategy is trying to deepen the relationships, you know, driving client centricity. I would say that TalentSuite had a little impact, but not much. Because, you know, we did a soft launch in November, and the harder launch was in January. We converted all of the clients seamlessly. We didn't have any problems. Now we're embarking on a journey to get all of our 2,000 front of the house colleagues to be able to talk to our clients about, you know, what I think our data is beyond compare. I really do. I look at it and say it's kind of Moneyball for business.

Speaker #4: Yeah, we had a killer—we had a killer couple of months in the quarter of new business. We, again, the strategy is trying to deepen the relationships, driving client centricity.

Speaker #4: And I would say that Talent Suite had a little impact, but not much, because we did a soft launch in November. And the harder launch was in January.

Speaker #4: We converted all of the clients seamlessly. We didn't have any problems. And now we're embarking on a journey to get all of our 2,000 front-of-the-house colleagues to be able to talk to our clients about what I think—our data is beyond compare.

Speaker #4: I really do. And so I look at it and say it's kind of moneyball for business. And we've got 50-plus years of knowing how you separate great from good.

Gary Burnison: We've got 50-plus years, knowing how you separate great from good. I think in an environment of going forward, where companies are gonna have to do more with less, I think this could play a big role in our future. I don't simply look at it as a digital solution play. It's really connected to everything we do. Our RPO solution, executive search solution, professional search solution. It's a foundation for the firm. We've never in the past taken all of our IP and put it in a seamless warehouse where you can go in and do benchmarking on your workforce and all that.

Speaker #4: And I think in an environment going forward, where companies are going to have to do more with less, I think this could play a big role.

Speaker #4: In our future. But I don't simply look at it as a digital solution play. It's really connected to everything we do—our RPO solution, executive search solution, and professional search solution.

Speaker #4: It's a foundation for the firm. We've never in the past taken all of our IP and put it in a seamless warehouse where you can go in and do benchmarking on your workforce and all that.

Gary Burnison: It's early days and, you know, we've rolled out the technology, and now it's getting our front of the house colleagues, on a very targeted basis, to take this to our client base.

Speaker #4: So, look, it's early days, and we've rolled out the technology. And now it's getting our front-of-the-house colleagues, on a very targeted basis, to take this to our client base.

Gary Burnison: It's early days and, you know, we've rolled out the technology, and now it's getting our front of the house colleagues, on a very targeted basis, to take this to our client base.

Trevor Romeo: Thanks, Gary. That's encouraging. Maybe one other Talent Suite question. Now that you have it in place, up and running, in addition to your other sort of tech and AI investments, how do you view Korn Ferry's technology spending, I guess, in total in the next few years, whether that's CapEx or OpEx? Is the ongoing run rate here, you think gonna be higher or lower than you may have seen in the past, or the same, I guess?

Speaker #3: Thanks, Gary. That's encouraging. And then maybe one other talent suite question. Now that you have it in place, up and running, in addition to your other sort of tech and AI investments, how do you view Korn Ferry's technology spending?

Speaker #3: I guess, in total, in the next few years—whether that's CapEx or OpEx—is the ongoing run rate here, you think, going to be higher or lower than you may have seen in the past?

Speaker #3: Or the same, I guess?

Gary Burnison: Well, I think Bob can probably address that more. You know, I would just say that when you look back, we've had a fairly balanced approach to capital deployment. In, call it the last trailing, you know, 15 months or so, I think the bent has been more towards Talent Suite and CapEx. Obviously, you know, dividend. Look, we just raised the dividend again. I think it's our 7th raise in 6 years. You know, I think you may see us lean a little bit more heavily into stock buybacks over the next few months. There could be a slight change versus call it, you know, the first 9 months of this fiscal year because it was heavily tilted towards technology spend.

Speaker #4: Well, I think Bob can probably address that more. I would just say that when you look back, we've had a fairly balanced approach to capital deployment.

Speaker #4: In, call it, the last trailing 15 months or so, I think the bent has been more towards Talent Suite and CapEx. And obviously, dividend.

Speaker #4: Look, we just raised the dividend again. I think it's our seventh raise in six years. I think you may see us lean a little bit more heavily into stock buybacks.

Speaker #4: Over the next few months, there could be a slight change versus, call it, the first nine months of this fiscal year, because it was heavily tilted towards technology spend.

Robert Rozek: Yeah, I think that's right, Gary. I think Trevor, if you look at our CapEx spend, we're probably around $80 to $85 million run rate currently, and we had anticipated, you know, that coming back down to what you would have seen more historically is say $60 to $65 million run rate. We'll probably see that drop going into our fiscal 2027. We're, you know, in the process of doing our planning for next year right now. As Gary indicated, it's one of the things that we look at and think about quite a bit, is how we allocate capital. I would say you'll see the CapEx probably drop a bit, but maybe lean more heavily, as Gary indicated, into buybacks.

Bob Rozek: Yeah, I think that's right, Gary. I think Trevor, if you look at our CapEx spend, we're probably around $80 to $85 million run rate currently, and we had anticipated, you know, that coming back down to what you would have seen more historically is say $60 to $65 million run rate. We'll probably see that drop going into our fiscal 2027. We're, you know, in the process of doing our planning for next year right now. As Gary indicated, it's one of the things that we look at and think about quite a bit, is how we allocate capital. I would say you'll see the CapEx probably drop a bit, but maybe lean more heavily, as Gary indicated, into buybacks.

Speaker #3: Yeah, I think that's right, Gary. I think if you, Trevor, if you look at our CapEx spend, we're probably around an $80 to $85 million run rate currently.

Speaker #3: And we had anticipated that coming back down to what you would have seen more historically is, say, a $60 to $65 million run rate, and we'll probably see that drop going into our fiscal '27.

Speaker #3: So we're in the process of doing our planning for next year right now. And as Gary indicated, it's one of the things that we look at and think about quite a bit—how we allocate capital. And I would say you'll see the CapEx probably drop a bit, but maybe lean more heavily, as Gary indicated, into buybacks, certainly when you see the market dislocated like it is today.

Robert Rozek: Certainly when you see the market dislocated like it is today.

Bob Rozek: Certainly when you see the market dislocated like it is today.

Trevor Romeo: Yep. Okay. Thank you both for that. If I could maybe just ask one more, on your interim business. I think you talked about the cross-referrals driving outperformance there. Obviously, you know, the temp staffing space has been very tough the last several years as you pointed out. Maybe just what kind of demand trends are you seeing there, independent of your cross-referrals? Are you seeing maybe a little pickup in conversations the last few months? Then on the bill rate jumping up to almost $150, anything you'd call out from a mix perspective there?

Speaker #3: Yep. Okay. Thank you both for that. If I could maybe just ask one more, on your interim business—I think you talked about the cross-referrals driving outperformance there.

Speaker #3: Obviously, the temp staffing space has been very tough the last several years, as you've played it out. So maybe just—what kind of demand trends are you seeing there, independent of your cross-referrals?

Speaker #3: Are you seeing maybe a little pickup in conversations the last few months? And then on the bill rate jumping up to almost $150, anything you'd call out from Nick's perspective there?

Gary Burnison: Yeah. It's the Korn Ferry lift. I mean, we're trying to, we wanna compete there at the very high end of talent, because of the questions that have been raised around AI and the like. We wanna be focused on the outliers of achievement. Yes, you know, you look at what I've seen in the industry, people have reported, they saw, you know, a slight uptick sequentially late November, saw that in December, seeing it flow through to January, somewhat flat in February because of the shorter number of days. Yes, that we've seen absolutely that go up. It's up, it was up 4% in the quarter. That's just the interim part of the business. The bill rates have gone up.

Speaker #4: Yeah. It's the Korn Ferry lift. I mean, we want to compete there at the very high end of talent, because of the questions that have been raised around AI and the like.

Speaker #4: So we want to be focused on the outliers of achievement. And yes, you look at what I've seen in the industry, people have reported they saw a slight uptick sequentially late November, saw that in December, saw it flow through to January, somewhat flat in February because of the shorter number of days.

Speaker #4: But yes, we've seen absolutely that go up. It's up—it was up 4% in the quarter. That's just the Interim part of the business.

Speaker #4: And the bill rates have gone up. And so the temp penetration rate is still at historic lows. You know that better than I. I look back over the last 25 years, and generally in the workforce, there's been about, in the United States, 2.5 million temp workers.

Gary Burnison: You know, the temp penetration rate is still, you know, at historic lows. You know that better than I. You know, I look back over the last 25 years, and generally in the workforce, there's been about, in the United States, 2.5 million temp workers. Obviously, the penetration rate has been significantly higher than it has today. I don't think that's gonna go away. In fact, you could make the argument that companies are gonna need more flex arrangements to deal with, you know, one-off projects and the like. We're very, very happy with how that solution has done. You know, the opportunity there, quite candidly, is not only the United States for us, but Europe.

Speaker #4: Obviously, the penetration rate has been significantly higher than it is today. I don't think that's going to go away. In fact, you could make the argument that companies are going to need more flex arrangements to deal with one-off projects and the like.

Speaker #4: So we're very, very happy with how that solution has done. And the opportunity there, quite candidly, is not only the United States for us, but Europe.

Gary Burnison: We made an investment in an interim solution and an executive interim solution in Europe, going back probably 15, 16 months ago. That has absolutely outperformed. One of the reasons why it's outperformed is because how we have integrated, not only because there's talented people, but we've also been very, very purposeful on a We Are Korn Ferry go-to-market strategy.

Speaker #4: And we made an investment in an interim solution, in an executive interim solution in Europe, going back probably 15, 16 months ago. And that has absolutely outperformed.

Speaker #4: And one of the reasons why it's outperformed is because of how we have integrated, not only because there's talented people, but we've also been very, very purposeful on a 'We are Korn Ferry' go-to-market strategy.

[Analyst] (Goldman Sachs): All right. Thank you very much.

Trevor Romeo: All right. Thank you very much.

Speaker #3: All right. Thank you very much.

Operator: Our next question will come from the line of George Tong with Goldman Sachs. Please go ahead.

Speaker #1: Our next question will come from the line of George Tong with Goldman Sachs. Please go ahead.

[Analyst] (Goldman Sachs): Hi, this is Alex on for George. Wanted to see if you could provide an update on what you're seeing with sales cycles and how client spending behavior may be differing across segments, and whether there's been any impact from macro sensitivity.

Speaker #5: Hi, this is Alex on for George. I wanted to see if you could provide an update on what you're seeing with sales cycles and how client spending behavior may be differing across segments.

Speaker #5: And whether there's been any impact from macro sensitivity.

Gary Burnison: I haven't seen any. You know, the reality is more of the same. I mean, you know, the BLS numbers in the United States were obviously not great. They weren't great because of healthcare. If you just look back over many months, the jobs that have been created were in healthcare or government. You know, I mean, to me, it's more of the same. Now, what I can't comment on is the last 10 days or so, and I don't think anybody can. We have not factored that in to our guidance. 10 days in, you just don't know. I can just tell you the direction of travel for this firm is unbelievable. I've been here with dot-com crisis, long-term credit crisis, great recession, COVID, all of that.

Speaker #4: I haven't seen any. The reality is more of the same. I mean, the BLS numbers in the United States were obviously not great. They weren't great because of healthcare.

Speaker #4: But if you just look back over many months, the jobs have been created. We're in healthcare, government. So, I mean, to me, it's more of the same.

Speaker #4: Now, what I can't comment on is the last ten days or so. And I don't think anybody can. We have not factored that into our guidance.

Speaker #4: Ten days in, we just—you just don't know. But I can just tell you, the direction of travel for this firm is unbelievable. And I've been here with the dot-com crisis, long-term credit crisis, Great Recession, COVID, all of that.

Gary Burnison: Russia, Ukraine, I can go on and on and on. You know, the changes in China and the extended lockdowns there. I can go on and on and on. The reality is, when you look at the direction of travel, this firm is outstanding.

Speaker #4: Russia, Ukraine—I can go on and on and on. The changes in China, and the extended lockdowns there. I can go on and on and on.

Speaker #4: But the reality is, when you look at the direction of travel, this firm is outstanding.

[Analyst] (Goldman Sachs): Great. Thanks,

Gary Burnison: Yeah. The other thing I would add to that, too, is if you look at the new business in Q3, Gary mentioned we had a couple of really good months. The thing that I found very interesting, usually October and March are, you know, high water marks for new business, then December is usually one of the slowest months because of the year-end holidays and so on. We hit an all-time high in new business in October, we eclipsed that in December this past year, we saw some very large engagements being signed. In fact, 44% of the consulting new business in the Q3 were engagements over half a million dollars. As Gary mentioned before, we're playing top of the house.

Bob Rozek: Yeah. The other thing I would add to that, too, is if you look at the new business in Q3, Gary mentioned we had a couple of really good months. The thing that I found very interesting, usually October and March are, you know, high water marks for new business, then December is usually one of the slowest months because of the year-end holidays and so on. We hit an all-time high in new business in October, we eclipsed that in December this past year, we saw some very large engagements being signed. In fact, 44% of the consulting new business in the Q3 were engagements over half a million dollars. As Gary mentioned before, we're playing top of the house.

Speaker #5: Great. Thanks.

Speaker #4: Yeah, the other thing I would add to that too is, if you look at the new business in the third quarter—Gary mentioned—we had a couple of really good months.

Speaker #4: The thing that I found very interesting: usually, October and March are high watermarks for new business. And then December is usually one of the slowest months because of the year-end holidays and so on.

Speaker #4: And we hit an all-time high in new business in October, and we eclipsed that in December this past year. And we saw some very large engagements being signed.

Speaker #4: In fact, 44% of the consulting new business in the quarter were engagements over half a million dollars. So, as Gary mentioned before, we're playing top of the house.

Gary Burnison: People really value what we bring, and they're struggling to work their way through, you know, the somewhat chaotic world that we live in today. They're only gonna do that through their talent, and that's exactly where we come in.

Bob Rozek: People really value what we bring, and they're struggling to work their way through, you know, the somewhat chaotic world that we live in today. They're only gonna do that through their talent, and that's exactly where we come in.

Speaker #4: People really value what we're bringing. And they're struggling to work their way through the somewhat chaotic world that we live in today. And they're only going to do that through their talent.

Speaker #4: And that's exactly where we come in.

[Analyst] (Goldman Sachs): Yeah. Got it. That's very helpful. I want to ask on the digital side, which saw some improvement sequentially but was flat year-over-year on a constant currency basis. Can you touch on what drove this and how the pivot toward enterprise-oriented sales is progressing?

Speaker #5: Yeah, got it. That's very helpful. And then I want to ask on the digital side, which saw some improvements sequentially, but was flat year over year on a constant currency basis.

Speaker #5: So, can you touch on what drove this and how the pivot toward enterprise-oriented sales is progressing?

Gary Burnison: Yeah. I mean, that's something we have to do. We have to continue to look at our own talent, and we have to ensure that all 2,000 of our consultants can have a more enterprise-wide conversation, for sure. You know, when you look at the digital solution only, you're gonna find that, you know, it's just an increasing percentage is longer term, you know, kind of Software as a Service deal. I don't, I don't sit there and look at simply revenue. I look at the entire firm and what is it doing in terms of our win-loss rate, which we also carefully monitor and study. You know, what is the backlog doing?

Speaker #4: Yeah. I mean, that's something we have to do. We have to continue to look at our own talent, and we have to ensure that all 2,000 of our consultants can have a more enterprise-wide conversation, for sure.

Speaker #4: And when you look at the digital solution only, you're going to find that it's just the an increasing percentage is longer-term kind of software as a service deals.

Speaker #4: So I don't sit there and look at simply revenue. I look at the entire firm and what it is doing in terms of our win-loss rate.

Speaker #4: Which we also carefully monitor and study. And is the backlog—what is the backlog doing? So I sit there and say, in this environment, am I totally satisfied?

Gary Burnison: You know, I sit there and say, in this environment, you know, am I totally satisfied? No, not satisfied. We've only been at this with this IT in a, you know, in a common warehouse for a couple months. I mean, this has not been very long at all.

Speaker #4: No, not satisfied. But we've only been at this, with this IP in a common warehouse, for a couple of months. I mean, this has not been very long at all.

Robert Rozek: Makes sense. Thank you.

[Analyst] (Goldman Sachs): Makes sense. Thank you.

Speaker #5: Makes sense. Thank you.

Operator: Our next question will come from the line of Joshua Chan with UBS. Please go ahead.

Speaker #1: Our next question will come from the line of Josh Chan with UBS. Please go ahead.

Joshua Chan: Hi. Good morning, Gary and Bob. I guess

Speaker #3: Hi. Good morning, Gary and Bob. I guess on your consulting side of the business—hi—this is usually a business that is stronger when the economy is more sure, I guess.

Gary Burnison: Hey, Josh.

Joshua Chan: consulting side of the business. Hi. This is usually a business that is stronger when the economy is more poor, I guess. Could you just talk to the recent strengths in this consulting new business? And, you know, what are some of the common threads that you're getting from sort of the, you know, half a million-plus engagements that Bob kind of alluded to earlier?

Speaker #3: And so, could you just talk to the recent strengths in this consulting new business, and what are some of the common threads that you're getting from sort of the half-a-million-plus engagements that Bob kind of alluded to earlier?

Gary Burnison: It's around transformation. It's around org strategy and transformation. That would be the big-ticket theme, for those larger engagements. You know, I read something last night. There was a report that, you know, consulting firms in calendar 2025 grew something like 5 or 5.5%. You know, you have to kind of question that a little bit. You know, I look at our overall firm over the past, you know, call it 12 months, and I'm saying, Hey, we're, you know, we're in line or better, recognizing that, you know, part of our business deals with the labor markets, which haven't been exactly fantastic.

Speaker #4: It's around transformation. It's around org strategy and transformation. That would be the big-ticket theme for those larger engagements. And I read something last night.

Speaker #4: There was a report that consulting firms in calendar 2025 grew something like 5 or 5.5 percent. You have to kind of question that a little bit.

Speaker #4: But I look at our overall firm over the past, call it, 12 months. And I'm saying, 'Hey, we're in line or better.' Recognizing that part of our business deals with the labor markets, which haven't been exactly fantastic.

Robert Rozek: Hey, Josh. The other thing I would say, too, is if you look at in the consulting business right now, Gary talked about transformation. A lot of companies are looking at their talent and are they ready to be productive in an AI world. We have solutions that look at AI-Ready Leaders, AI-ready talent, and that's where you see the assessment and succession having strong year-over-year growth in that quarter as well.

Bob Rozek: Hey, Josh. The other thing I would say, too, is if you look at in the consulting business right now, Gary talked about transformation. A lot of companies are looking at their talent and are they ready to be productive in an AI world. We have solutions that look at AI-Ready Leaders, AI-ready talent, and that's where you see the assessment and succession having strong year-over-year growth in that quarter as well.

Speaker #3: Hey, Josh. The other thing I would say, too, is if you look at, in the consulting business right now, Gary talked about transformation—a lot of companies are looking at their talent and whether they are ready to be productive in an AI world.

Speaker #3: And we have solutions that look at AI-ready leaders, AI-ready talent. And that's where you see the assessment and succession having strong year-over-year growth in that quarter as well.

Joshua Chan: Okay. Okay. That's great color. Thank you both. Maybe a quick question on margin. If Korn Ferry continues to grow at the similar revenue growth rates that you're kind of guiding to, what's the right way to think about kind of margin expansion for the company as a whole kind of going forward?

Speaker #5: Okay, okay. That's great color. Thank you both. And then maybe a quick question on margins. So if Korn Ferry continues to grow at the similar revenue growth rates that you're kind of guiding to, what's the right way to think about kind of margin expansion for the company as a whole, kind of going forward?

Gary Burnison: I mean, you know, in this investment, you know, the investment horizon we have right now, we've. You know, I think what we've said is 16% to 18%. Part of it depends on, you know, the M&A execution and, for example, how much, if there's more opportunities, which I think there are, around the interim market and the interim solution, that obviously, that mix change has a big impact on that question. You know, we also, we also have to make sure that we are making the right investments as a firm, particularly around talent. So, you know, I think for now that's over this investment horizon, that's reasonable.

Speaker #4: I mean, in this investment, the investment horizon we have right now, I think what we've said is 16 to 18 percent. Part of it depends on the M&A execution.

Speaker #4: And, for example, how much—if there are more opportunities, which I think there are—around the interim market and the interim solution? Obviously, that mix change has a big impact on that question.

Speaker #4: But we also have to make sure that we are making the right investments as a firm, particularly around talent. So, I think for now, that over this investment horizon, that's reasonable.

Gary Burnison: You know, you look back, over the last, you know, kind of 3 years or 4 years, something like that. This is after the great resignation, which probably ended, you know, somewhere late 2022, early mid 2023. The reality is our headcount, per colleague is up almost like 35%. You know, we've got a track record of being able to, you know, to drive client impact the top line, but also be more profitable.

Speaker #4: But you look back over the last kind of three years, or four years, something like that—this is after the Great Resignation, which probably ended somewhere late '22, early to mid '23.

Speaker #4: The reality is our headcount per colleague is up almost, like, 35%. So we've got a track record of being able to drive client impact to the top line, but also be more profitable.

Joshua Chan: That's right. Yeah, thanks for that color, Gary. Yeah, congrats on the good result.

Speaker #3: That's right. Yeah, thanks for the color, Gary. And yeah, congrats on a good result.

Gary Burnison: Thanks, Josh.

Speaker #2: Thanks, Josh.

Operator: Our next question will come from the line of Mark Marcon with Baird. Please go ahead.

Speaker #1: Our next question will come from the line of Mark Markin with Baird. Please go ahead.

Mark Marcon: Good afternoon. I just wanted to follow up on the last series of questions. Gary, when you're talking about the investment horizon, how long are you thinking in terms of that 16% to 18%? Because I can't help but notice, you know, you're increasing your revenue. If we go through all the charts, it's like the number of consultants on staff has actually been flat to down, most frequently down. I'm trying to think through, like, when you think long term, and you think about, like, hey, we've got 2,000 front-facing consultants, 9,000 colleagues in total, we're probably in the early stages in terms of implementing AI. I'm just wondering, like, how, when you really think about longer term, you know, how efficient can you be?

Speaker #6: Good afternoon. I just wanted to follow up on the last series of questions. Gary, when you're talking about the investment horizon, how long are you thinking in terms of that 16% to 18%?

Speaker #6: Because I can't help but notice you're increasing your revenue, and then if we go through all the charts, it's like the number of consultants on staff has actually been flat to down.

Speaker #6: Most frequently down. And so, I'm trying to think through, when you think long-term and you think about, like, 'Hey, we've got 2,000 front-facing consultants, 9,000 colleagues in total, and we're probably in the early stages in terms of implementing AI.' I'm just wondering, how, when you really think about longer-term, how efficient can you be?

Mark Marcon: I know you've got to make some investments in terms of people, but how are you thinking about that longer term?

Speaker #6: And I know you've got to make some investments in terms of people—longer term?

Gary Burnison: You know, clients have asked me that question, Mark, as they're looking at their organization, this comment is not specifically to Korn Ferry, and this is clearly an estimate. I think if you were to say, look out over five to seven years, given the demographic trends that we've talked about on this call and the quote, shrinking labor force, not as many people coming into the labor force, not only in the US, but other countries as well. Then the promise, you know, then the question is, well, how do you fill that gap? Well, you either do it through immigration or technology.

Speaker #4: Clients have asked me that question, Mark, as they're looking at their organization. And I'm not—this comment is not specifically to Korn Ferry. And this is clearly an estimate.

Speaker #4: But I think if you were to say, 'Look out over five to seven years, and given the demographic trends that we've talked about on this call, and the shrinking labor force—not as many people coming into the labor force, not only in the United States but other countries as well,' and then the promise, then the question is, 'Well, how do you fill that gap?'

Speaker #4: Well, you either do it through immigration or technology. So given the mathematics around labor force participation, and the promise of AI, what I've told clients is if you look out that kind of five years, middle of the bell curve, I would expect your labor force to be smaller by, say, 15% for sure.

Gary Burnison: Given the mathematics around labor force participation and the promise of AI, what I've told clients is if you look out that kind of 5 years, median of the bell curve, I would expect your labor force to be smaller by, say, 15% for sure. Now, I'm not talking about every company, every industry, every sector, but just generally speaking, the theme would have to be, as it is for the country of the United States, it would have to be more with less. That's the advice that I've been giving to clients.

Speaker #4: Now, I'm not talking about every company, every industry, every sector. But just generally speaking, the theme would have to be—as it is for the country of the United States—it would have to be more with less.

Speaker #4: So that wouldn't—that's the advice that I've been giving to clients.

Mark Marcon: Great. I mean, where would you say you are in terms of harnessing AI, in terms of increasing the efficiency? Are you know... Is it the first inning? Are we singing the national anthem, or are we in the third inning?

Speaker #6: Great. And I mean, where would you say you are in terms of harnessing AI in terms of increasing the efficiency? Are you—is it the first inning?

Speaker #6: Are we singing the national anthem? Or are we in the third inning?

Gary Burnison: Oh, we've taken the field. You know, the reality with all this talk, I think that, you know, many companies are in the first inning here. There's enough there there where you say, "Okay, I get it," you know? Technology can definitely make you more efficient. The question is behavioral change. The real question is, you know, people don't change unless there's a reason to change. The question for leadership of companies is how do you create that change? How do you get people to truly embrace the, you know, ever-evolving technology that's out there? That's really the question. I think, look, the reality is I think most people are in the first inning, Mark.

Speaker #4: Oh, we've taken the field. Look, the reality with all this talk—I think that many, many, many companies are in the first inning here.

Speaker #4: But there's enough there there where you say, 'Okay, I get it. Technology can definitely make you more efficient.' And then the question is behavioral change.

Speaker #4: So, the real question is: people don't change unless there's a reason to change. And the question for leadership of companies is, how do you create that change?

Speaker #4: How do you get people to truly embrace the ever-evolving technology that's out there? That's really the question. And I think, look, the reality is, I think most people are in the first inning, Mark.

Mark Marcon: Okay, great. With regards to Talent Suite, can you talk a little bit about like when you're doing these big deals and you mentioned the aerospace company with 40,000 employees, when you're pricing this and you're pricing it for complete access to Talent Suite, how do you price it? How should we think about that sort of lift?

Speaker #6: Okay, great. And then with regards to Talent Suite, can you talk a little bit about when you're doing these big deals—and you mentioned the aerospace company with 40,000 employees—when you're pricing this, and you're pricing it for complete access to Talent Suite, how do you price it?

Speaker #6: How should we think about that sort of lift—both in terms of margins and revenue?

Gary Burnison: Size of company.

Bob Rozek: Size of company.

Mark Marcon: Both in terms of margins and revenue.

Bob Rozek: Both in terms of margins and revenue.

Gary Burnison: Yeah. Size of company and number, you know, size of company and number of seats. I mean, that's generally how we do it. Is it an existing client of Korn Ferry? You know, what we've seen is that, for example, people will ask the question, CEOs will ask the question, Is my, is my labor force, quote, AI-ready? Which a lot of that will come down to agility and dealing with ambiguity. You know, what you would do is go in and assess 5, 10,000 people and, you know, we produce an MRI that would say, Okay, this is what the thinking style, leadership style of the organization looks like. Based on our research, this is what a future-ready workforce would look like. Here are the, you know, here's how you stack up.

Speaker #4: Yeah, yeah. Size of company and number—size of company and number of seats. I mean, that's generally how we do it. And is it an existing client of Korn Ferry?

Speaker #4: So what we've seen is that, for example, people will ask the question, CEOs will ask the question, "Is my labor force 'AI-ready'?" Which a lot of that will come down to agility in dealing with ambiguity.

Speaker #4: So then what you would do is go in and assess 5,000, 10,000 people. And we've produced an MRI that would say, 'Okay, this is what the thinking style, leadership style of the organization looks like.' Based on our research, this is what a future-ready workforce would look like.

Speaker #4: And here are the, here's how you stack up. Here's the gaps. And here's a plan towards, here's a plan towards remediation. And it also depends too, is what level of consulting is wrapped around that.

Gary Burnison: Here's the gaps and here's a plan towards remediation. It also depends too, is what level of consulting is wrapped around that.

Mark Marcon: Got it. A question for Bob, maybe. With regards to consulting in Q3, you had a 5% lift in terms of revenue. The margins went down by 70 basis points year-over-year. The headcount's down. What's the underlying reason for those margins to be down? This is in the context of a great quarter, just.

Speaker #6: Got it. And then, a question for Bob, maybe. With regards to consulting in the third quarter, you had a 5% lift in terms of revenue.

Speaker #6: But the margins went down by 70 basis points year over year. And the headcount's down. What's the underlying reason for those margins to be down?

Speaker #6: And this is in the context of a great quarter. So just kind of understand that one part.

Robert Rozek: Yeah.

Bob Rozek: Yeah.

Mark Marcon: kind of understand one part.

Robert Rozek: Yeah, it is. It is, Mark. One of the things is our fee revenues were, you know, well above our guidance range. They attract more bonus dollars. We, you know, we had an opportunity to get caught up there on the bonus that we provide for folks, and that put a little bit of downward pressure on the margin in the quarter.

Bob Rozek: Yeah, it is. It is, Mark. One of the things is our fee revenues were, you know, well above our guidance range. They attract more bonus dollars. We, you know, we had an opportunity to get caught up there on the bonus that we provide for folks, and that put a little bit of downward pressure on the margin in the quarter.

Speaker #4: Yeah. Yeah. It is. It is, Mark. And one of the things is our fee revenues were well above our guidance range. They attract more bonus dollars.

Speaker #4: So we had an opportunity to get caught up there on the bonus that we provide for folks, to put a little bit of downward pressure on the margin in the quarter.

Mark Marcon: Got it. Okay, that's great. Gary, one last one for you if you'll take it, I know we're only 10 days in. Generally speaking, like after all of the various things that you've gone through, what's your expectation in terms of like how long this would have to continue before, you know, plans would change or that you'd actually see a meaningful difference just in terms of client behavior?

Speaker #6: Got it. Okay, that’s great. And then, Gary, one last one for you, if you’ll take it. And I know we’re at only 10 days in.

Speaker #6: But generally speaking, after all of the various things that you've gone through, what's your expectation in terms of how long this would have to continue before plans would change, or that you'd actually see a meaningful difference just in terms of client behavior?

Gary Burnison: Well, this is just one person's, I mean, one person's view. It's. I don't think anybody really knows the answer to that. I mean, in the United States, you know, transportation and, you know, transportation costs, including gas, are 17% to 20% of consumer spending. Elevated oil prices are not good for consumer spending, which you're already dealing with a K-shaped economy. You know, there's a cost of living crisis. That's clearly a negative. To what extent have we opened Pandora's box? I'm the least qualified person to answer that question, but, you know, that's certainly one.

Speaker #4: Well, this is just one person—I mean, one person's view. I don't think anybody really knows the answer to that. I mean, in the United States, transportation and transportation costs, including gas, are 17 to 20 percent of consumer spending.

Speaker #4: And so, elevated oil prices are not good for consumer spending, which—you’re already dealing with a K-shaped economy. There’s a cost of living crisis.

Speaker #4: So that's clearly a negative. And to what extent have we opened Pandora's box on the least qualified person to answer that question? But that's certainly one.

Gary Burnison: You know, our colleagues in the Middle East, which we have an incredible business, our colleagues are continuing under very difficult circumstances, much like our colleagues in Ukraine have done throughout this time. They're working from home, you know, taking safety precautions. As of last week, it hasn't, you know, materially impacted our delivery of services. I think, you know, you go out, I think it'll be another, you know, 90 days or so, before you really get line of sight on what all this means beyond oil. I mean beyond oil. What does this really mean?

Speaker #4: Our colleagues in the Middle East, where we have an incredible business, are continuing under very difficult circumstances, much like our colleagues in Ukraine have done.

Speaker #4: Throughout this time, they're working from home, taking safety precautions. As of last week, it hasn't materially impacted our delivery of services. But I think if you go out, I think it'll be another 90 days or so.

Speaker #4: Before you really get line of sight on what all this means—beyond oil. I mean, beyond oil. What does this really mean?

Mark Marcon: Okay. Great. Thank you very much.

Speaker #6: Okay, great. Thank you very much.

Operator: it appears there are no further questions at this time, Mr. Burneson.

Speaker #1: And it appears there are no further questions at this time. Mr. Burnison?

Gary Burnison: Okay, thank you all for the questions. I'm incredibly proud of this organization and to be a founding partner, which may seem a ways away of, LA28, but it's not. You know, I think that will highlight just the power of our organization, for sure. We're excited about that. With that, thank you for your questions, and we'll talk to you next time. Bye-bye.

Speaker #4: Okay. Thank you all for the questions. I'm incredibly proud of this organization, and to be a founding partner—which may seem a ways away—of LA28.

Speaker #4: But it's not, and I think that will highlight just the power of our organization, for sure. We're excited about that. So with that, thank you for your questions.

Speaker #4: And we'll talk to you next time. Bye-bye.

Operator: Ladies and gentlemen, this conference call will be available for replay for one week starting today, running through the end of the day, 16 March 2026, ending at midnight. You may access the Echo replay service by dialing 800-770-2030 and entering the access code 3268315, followed by the pound key. Additionally, the replay will be available for playback at the company's website, www.kornferry.com, in the investor relations section. This concludes today's call. Thank you all for joining. You may now disconnect.

Speaker #1: Ladies and gentlemen, this conference call will be available for replay for one week starting today, running through the end of the day, March 16, 2026.

Speaker #1: Ending at midnight. You may access the echo replay service by dialing 800-770-2030 and entering the access code 3268315 followed by the pound key. Additionally, the replay will be available for playback at the company's website.

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