Q1 2020 Earnings Call
Ladies and gentlemen, thank you for standing by the conference will begin shortly please continue to hold.
Ladies and gentlemen, thank you for standing by and welcome to the Korn Ferry first quarter fiscal year 2020 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 Korn Ferry Dotcom, a copy of the financial presentation that we will be reviewing with you today before I turn the call over to your host Mr. Gary 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.
Although the company believes the expectations reflected in such forward looking statements are based on reasonable assumptions investors are cautioned not to place undue reliance on such statements.
Actual results in future periods may differ materially from those 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 reports filed by the company with the SEC.
Including the company's annual report for fiscal year 2019 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 direct.
Comparable GAAP financial measure is contained in the financial presentation and earnings release related to this call both of which are posted in the Investor Relations section of the company's website at www.
That Korn ferry dotcom with that I'll turn the call over to Mr. Burnison. Please go ahead Mr. burnison, okay. Thanks, Greg and.
Good afternoon, everybody and thanks for joining us we had a very good quarter.
We came in with growth at about 7% constant currency.
Which is 4% actual fee revenue was 485 million and that growth was was clearly driven by our appeal in professional search offering which grew 27% constant currency and thats. The 20 onest consecutive quarter of double digit growth for our PEO and professional search business.
We saw revenue growth in all geographies again constant currency.
Asia and South America were up 11% EMEA was up seven and North America was up five earnings remained very strong EBITDA was about $75 million and we continued to allocate capital to share repurchases we bought back.
Almost a million shares today using about $40 million, our financial results for the quarter.
I think they really demonstrate the durability of our business model and weather.
Whether that's driving our clients organizational efficiency are delivering on an M&A integration.
Our firm Korn ferry not only helps organizations, but as importantly team as leaders in individuals exceed their potential and Thats. What this company is all about enabling people and organizations to indeed exceed their potential.
In a couple of months here November 14, Thats going to Mark our 55, though year in business and out of this.
Five decade journey on probably and certainly haven't been here for all 50 years, but I've been here for a good 17, or 18, and I think out of that out of that five decade journey I'm, probably more confident today about where we are positioned and our strategy than ever before I see.
Rich opportunities in our vast IP.
Which will provide a platform for digital insights.
A part of our business that provides more regular durable revenue streams, we have an advisory business today that is twice the size of what the entire firm was a decade ago I think weve got room.
Headroom in the Marquis and regional.
Clients, the marquees represent about 21% of our portfolio and in the first quarter. We expanded this to about 200 regional accounts.
I also look at opportunities like half advance, which a business that we've basically just started but.
You know it entails offering career advice to professionals and in very very short time, we've gone to kind of asking could we do this to a full fledged offering with 82000 professionals who are benefiting from.
To date about 11000 coaching sessions and I think we are building the world's career gymnasium.
For people to exercise their career.
Fitness and so that single rolodex.
That Leicester corn and Richard Ferry started this great firm with many years ago has been transformed into arguably.
The world's most comprehensive people and organizational databases I mean, we've got organizational benchmark data on 12000 entities 4 billion data points on professionals 69 million assessments taken and rewards data on over 20 million people and almost 25000 companies clearly that's mr. inside baseball.
And so that boutique firm of the pads with long line of business today put somebody in a job every three working minutes every month, we develop over 100000 individuals and weve dramatically now shifted to a global firm with solutions that synchronize and organization strategy and talent to drive superior performance for our clients. That's what it's all about so more than organizational strategy or compensation advisory more than talent acquisition more than leadership development Korn ferry any enables people and organizations to be more of that.
Simply put to exceed their potential today's Korn ferry is instrumental to the growth of organizations, helping them optimize their workforce and driving meaningful business outcome. So our go forward strategy is going to compete comprise really five pillars, one and enterprise go to market approach with clients of scale, creating a portfolio of house accounts, we'd like to see them be you know.
30, 30, 540% of our portfolio to developing a more subscription based revenue stream from our digital insights business, which was formerly called our products business.
Three continuing to create a career destination for our colleagues for a disciplined approach to capital, including M&A share repurchases and dividends and finally innovating and monetizing our IP. An example would be the Korn ferry advance offering that we've got now so im joined here with.
Our CFO , Bob Rozek, and Gregg Kvochak, So Bob I'll turn it over to you.
Great. Thanks, Gary and good afternoon, everybody I would echo Gary's comments on the strong results we had in this quarter.
The financial results do remain strong and we continue to demonstrate the durability of our business model.
As well as the relevance that our solutions have been driving meaningful business outcomes for our clients.
Fee revenue and I've, just completed first quarter grew to almost $485 million, which is up 4%.
Year over year in actual dollars and as Gary indicated nearly 7% measured at constant currency.
Each of our business segments grew in the first quarter Exec search up 2% advisory up 3% in our IPO in pro search up over 27% again, all measured at constant currency.
Earnings remained strong with EBITDA at approximately $75 million, which compared to adjusted EBITDA in the first quarter of fiscal 19 was up $4 million or about 5.8%.
A profitability also improved with EBITDA margin, reaching 15.5.
Per cent compared to an adjusted EBITDA margin last year, the first quarter of 15.2%.
Now turning to new business trends globally, new business in search was essentially flat year over year, while advisory new business was up 4% at constant currency for advisory new business in the first quarter was up 19% year over year in North America, but was partially offset by weakness in certain geographies internationally.
Demand for our appeal and pro search services remained strong in the first quarter with total new business awards of $97 million, consisting of $31 million of new pro search assignments and $66 million of longer term recruitment outsourcing contracts.
Now up to 66 million approximately $32 million, our new logos or new clients.
With approximately 34 million of the extensions and renewals, making up the difference.
Also of particular note in the first quarter, we had strong IPO wins in the UK, which is a strong indicator of the secular demand for recruitment outsourcing.
Even in markets challenged by economic and geopolitical turmoil.
At the end of the first quarter total cash and marketable securities were $567 million and that's up about $67 million compared to the first quarter of last year.
Excluding amounts reserved for deferred comp and for accrued bonus bonuses, our investable cash balance at the end of the first quarter was approximately $363 million and Thats also up about 67 million year over year, we had outstanding debt at the end of the first quarter of about $223 million.
As Gary indicated we did stay.
On path with our.
Balanced approach to capital allocation of the board declared a dividend of 10 cents.
And as Gary mentioned, we repurchased about a million shares spending just shy of $40 million.
And currently we have about 213 million remaining on our authorization for share repurchases.
And finally fully diluted earnings per share in the first quarter was 76 cents, that's down two cents or 2% compared to the same number last year in the first quarter and the decrease is primarily driven by a higher effective tax rate in this year's first quarter versus last year. This year, our rate was 24.9% and last year. The rate was 19.6% in the first fiscal quarter.
I'll now turn the call over to Greg to review operating segments in more detail. Okay. Thanks, Bob Global Executive search fee revenue in the first quarter of fiscal 20 was $193.2 million, which compared year over year was flat, but measured at constant currency was up 2% by region at constant currency North America was flat Europe was up 4%.
Asia Pacific was up 8% and Latin America was up 3%.
By executive search specialty practice at actual rates growth in the first quarter was led by our financial services practice at 6% and our industrial practice at 4% or life Sciences healthcare consumer goods and technology practices were flat to down modestly.
The total number of dedicated executive search consultants worldwide at the end of the first quarter was 569 up 24 year over year and up four sequentially.
Annualized fee revenue production per consultant in the first quarter was $1.36 million.
And that and the number of new search assignments opened worldwide in the first quarter was 1695, which was essentially flat year over year.
EBITDA for executive search in the first quarter was $48.9 million up $2.1 million.
Or over 4.6% year over year, the consolidated EBITDA margin for executive search in the first quarter fiscal 2000, it was 25.3% compared to 24.2% in the first quarter of fiscal 19.
Now turning to advisory and the first quarter Global Advisory fee revenue was $195.5 million, which grew 3% year over year measured in constant currency.
Growth was spread across all regions with North America up approximately 1% Europe up approximately 2% and Asia Pacific up approximately 9% all measured at constant currency.
As previously mentioned global New business awards in the first quarter for advisory or up approximately 4% year over year measured at constant currency with double digit growth in North America, being offset by weaker new business in international markets.
In the first quarter EBITDA for advisory was $34.6 million with with a 17.7% margin both flat year over year.
Finally growth in the.
For RPM professional search continued at a high double digit pace in the first quarter of fiscal 20.
In the first quarter.
RPM professional search generated a record high 94 point $95.8 million of fee revenue.
Which was up 24% year over year and measured at constant currency up over 27% all geographic regions grew in the first quarter with North America up, 28%, Europe up, 33% and Asia Pacific up 18%.
As previously mentioned in the first quarter ARPU on professional search was awarded another $97 million of global new business, consisting of $66 million of longer term recruitment outsourcing contracts and $31 million of shorter professional search assignments.
Earnings and profitability for appeal and professional search continues to grow with revenue in the first quarter EBITDA grew to $16.1 million up $3.6 million or nearly 29% year over year, and EBITDA margin improved year over year to 16.8%.
Now I'll turn the call back over to Bob to discuss our outlook for the second quarter of fiscal 20.
Thanks, Greg across all service lines global New business growth in July and August combined.
It was up 7% at constant currency led by.
Our PEO and professional search for executive search New business Awards in July and August combined were down about 3% year over year, If historic monthly new business trends repeat we expect executive search new business to grow sequentially in September and to hit a quarter peak in the month of October .
For advisory New business in the second quarter is typically seasonally strong led by our digital insights.
Globally Advisory New business in July and August combined was flat measured year over year at constant currency for professional search new business in July and August combine measured year over year at constant currency was up approximately 5%.
For our PEO, both business under contract in the pipeline of potential new business opportunities remain strong and we expect growth to continue in the second quarter.
Considering these factors and assuming worldwide economic conditions financial markets.
And foreign exchange rates remain steady we expect our consolidated fee revenue in the second quarter of fiscal 20 to range from 485 million to $505 million and we expect our consolidated diluted earnings per share to range from 76 cents to 84 cents.
That concludes our prepared remarks, and we would be glad to answer any questions you may have.
And ladies and gentlemen, if youd like to ask a question. Please press Star then one on your telephone keypad, you'll hear a tone, indicating you have been placed in Q and you may remove yourself from Q at any time by pressing the pound key if you are using a speakerphone. Please pick up the handset before pressing the numbers. Once again if you have a question. Please press Star then one at this time.
And our first question comes from the line of Kevin Mcveigh with Credit Suisse. Please go ahead. Your line is open.
Great. Thanks, so much pay thank you all.
Hey, Bob just looking at the Q2 guide you know seasonally Q2 is typically one of the one of the stronger quarters.
Any sense of in a look back it looks like typically lasts anywhere from $30 million to $50 million uptick.
The kind of lower end of the range would imply kind of flat higher end, a little bit of an uptick I guess, what's the gating factors on that number one and then.
What's the tax rate or is there anything else, it's kind of impact in the EPS in Q2, I guess, you just relative to where the revenue is.
Yes so.
I would say that the gating factors when you look across.
What's happening in the different geographies.
Yep trade wars with China.
Brexit knows where thats going to.
And.
Technical recession in Germany. So those are some of the factors that are.
Our weighing a little bit on our Q2 guide.
We're experiencing the softness in the geographies or countries, where you would expect to see that.
In terms of the.
The guidance EPS guidance.
It's really not the tax rate the tax rate is really no different than what we had talked about.
Previously I think it's going to be 25% to 27% in that range generally.
But we continue to be very bullish on our business. We believe deeply in our strategy and we're just continuing to execute.
On on our balanced approach to capital allocation, which first priority is to invest back into the business and so as we expand.
Our base of fee earners, as we expand the marquee account program introduced a regional accounts.
Those are areas, where we're investing back in at this point and Kevin If you if you step back and look at our marquee accounts.
Gary indicated they're about 21% of our revenue with those accounts in Q1, where it's a more mature program grew 9% in constant currency. So.
So that growth rate continues to outpace the rest of the company and Thats, where we are.
That's where we're making our investments.
Got it and is that just.
I guess, the only thing right along those lines to Bose.
The advisory headcount looked like it was down quarter to quarter, if I pick that up right anything there. It looked like it was went to 563 from 577 was that just anything anything was that just maybe certain regions that are a little bit weaker.
The the advisory headcount actually I think went up quarter to quarter, Kevin Great you have the number there yet so.
Not sure what you're referring to Kevin, but maybe the slides that we posted.
On our web site, we now counting consultants on execution staff and in the quarter and it was 1758 and in the prior quarter. So sequential quarter was 1699, yeah, that's actually up Thats up Kevin and Kevin what we've what we've done is we really shifted away from just.
Calling out the what we call the fee earners or the consultants in the advisory space access really taken a look at that business through more of an executive search lens and what really drives revenue is not just the individuals who sell the work, but you have to have.
The staff on hand to execute the work so we've gone to a different define number if you will in terms of what we're communicating now.
Got it and I'm, sorry, I was maybe at the wrong I was looking at slide number 12, where it looked like it went from 570 70 563.
The number of consultants professional staff.
Yeah.
I don't.
We can Kevin why we take that offline sorry about that maybe if I get it okay. Thank you guys.
Okay.
And our next question comes from the line of George Tong with Goldman Sachs. Please go ahead, hi, Thanks, good afternoon.
The advisory business moderated a bit to low single digit growth on a constant currency basis can you discuss initiatives that you have to re accelerate the growth towards your longer term growth target of 10% to 15%.
Well I think you would sit there and you would you'd look at several factors.
Number one.
When we have built that business, which was $8 million not that long ago. Today is over 800 million. When you look at that business, particularly the last investment we made in the Hay group.
A substantial 80% of that business was outside the United States, which was great at that point.
Where we are today is the first thing you've got to do is to increase the scale of the U.S. business. So that's something we're working on very very hard and you'll see that Bob commented.
On the new business that we saw in consulting in North America.
With double double digit very very impressive so that would be one number two is.
For any professional services firm you have to have house accounts, you have to have big loyal clients of scale, where you're delivering you know multiple services with hundreds of colleagues so that would be too.
The third is around our IP and we've got to continue to digital digitize that IP.
And create that more scalable.
Lift in revenue so those are really the.
The primary three avenues, excluding M&A.
That were going down.
Very helpful.
If we switch gears and look at the RPL business that segment grew 27% in constant currency very strong.
Can you dissect how much of this growth is being driven by in unpenetrated market versus new product and sales initiatives that you're internally executing upon.
Ill, let Bob do you the numbers, Paul I'm going to say, both I'm going to say you know the interesting thing.
About that our PEO and the professional search businesses I.
We made a purposeful decision.
To go after on the professional search side IP technical skills, and we think that market is at least $20 billion, maybe $30 billion.
And we're pretty excited about what we can do there that's just in perm recruiting that's not in staffing not not that we'd get into staffing, but it's an interesting.
You know we've had very very good results, there and I think back to the RPL business. The combination of our IP that we have.
Coupled with the technology is just been killer. So Bob I don't know if you want to put any yes, yes. So I think Gary's right. George I think it's I think it's both of them as you indicated there the pro search the emphasis is on I T on professional sales.
Individuals I think is paying those investments are paying off.
Listen on the our PEO side. They continue to use you heard Garry talk about all the IP.
That we have at the sort of center of our company and they continue to differentiate differentiate their product offering.
By leveraging that IP into there our appeal service offering and then the other folks can generate a lot of resumes that we can generate resumes.
That line up with what good looks like in organizations. We can provide people with interview questions. We can provide them with job descriptions roles responsibilities.
So our service offering goes much beyond what others in the marketplace offer then the other thing that's interesting is that.
I don't like to use the word cross sell but I would I would say the deeper multi line.
Offerings to the single client so I'll, just say cross sell you know in the this last quarter. So if you look at the cross sell into our consulting in terms of new business. It was about 20%. So another words, 20% of the consulting new business revenue came from primarily not all but primarily search if you look at the RPL business. It was 37%. If you look at the professional search business it was 52%.
Then when you look at the other lines of business into surgery was only six.
So clearly there is opportunity there, but I think that that one from strategy is actually.
No. It's it's not just a story.
It's reality you'd look at those numbers and say well you know something's working and and you have more opportunity and George as Bob One last point I would add one thing that I found very interesting as we were.
Looking at the results for the quarter and then we started to understand August as it played out.
We had.
Our PEO.
Good new business wins in both July and August .
In.
China in Germany. So again, you look at those marketplaces and you expect there to be.
Some headwinds there, but we actually saw the ARPU with some strength, which kind of runs to the whole counter cyclical theory that we've been talking about.
Got it very helpful. Thank you.
And our next question comes from the line of Tobey Sommer with Suntrust. Please go ahead.
Thank you.
I was wondering if you could comment on your appetite for acquisitions capital deployment this quarter focused on.
Share repurchase and if I recall correctly on the last call Gary you talked about acting in Windsor I don't know.
Up 7% in constant currency equates to winter, but how are you feeling.
Well I I think you know we're going to be very active in repurchasing our stock I just playing out I think the value I think that the platform that we have today and you think about the amount of profit that comes from a product business, that's more durable and when I look at comps and I see what theyre trading at.
It is substantially above our enterprise multiple of seven.
So I look at that business I look at the consulting business that is not as cyclical I look at comps at that on multiples on that and then I go to the RPL.
Business and run multiples and we're going to be more aggressive in buying back stock.
In terms of the acquisitions, Yeah. We're we are very active.
We you know this lost.
Three or four months, we had.
Three or four that we were.
Very very close to and we decided not to go forward.
So we're going to you know I do believe in that and I don't know if it's fall.
Clearly there's.
Economic malaise.
That's going to continue.
I wouldn't say I'm not going to say its fall, but we are going to have the orientation of investing into winter yes.
Okay. Thank you.
Could you talk about.
Elaborate on I guess your strategies to drive.
The growth in the marquee account base.
Above 30% of the mix.
I know you've had some plans.
Some efforts in recent years, but I was hoping you could kind of update us on how those are going what future.
Levers you I have to point, Yeah, I think it's you know it's a couple of things it it's.
You know you've got to make sure you're picking the right.
Accounts, you've got to have the right kind of governance, you've got to have the right kind of process. Then you need to have the right kind of people. So we've invested heavily now.
Over several quarters into account leaders.
Where their their sole responsibility is to have two three or four accounts and I think now we you know we don't have 100 of them but.
Close and so we've made a purposeful effort there. So I think it's it's kind of will and skills. So on the capability side I think we have to do.
We've got the ARPU offering not scale. There is no doubt about that working we can deliver it anywhere the leadership development. The training area is a big big market and we've got to do a better job there.
Of of creating platforms for individuals to grow and learn that can be.
You know sold to those marquee accounts you know now you may want to call that leadership development outsourcing.
But that's actually big dollars and scaled engagement. So one of the things that's interesting about this camp advance business, which today is obviously very very small, but the platform and the technology that we're using.
Can actually be used to deliver broad based.
Leadership development, So I think thats, yeah, its very tactical, but I think it gives you kind of a a practical element.
Some of the things you have to believe in.
Great last question for me can you talk about what you're hearing from clients because on an overall basis.
So some of the international revenue growth and for reasons I think Bob cited.
He has been slower.
Then in the U.S., but.
But then you kind of mentioned new business and a couple of sore spots as being fined in August so what are those conversations like what you hear.
I would say in one word confused.
It's it's an absolute it's a crazy environment. There is economic malaise in confusion and you know one tweet moves the market Somebodys comment moves the market 500 points is preposterous. So.
You can do.
The relationship with Britain in the year that was done over 50 years, you don't do that in UK lucked out it hasn't been done in three years, it's not going to be done in three months.
You could make the same argument around the.
The trade issues.
You know when those get solved.
So I would say it is confuse the consumer though ultimately in the United States.
Seems to be very very strong.
Productivity is okay rates are going lower that'll help people would have mortgages they'll be able to spend more money. So theres no you know theres no I haven't seen.
We'll talk around downsizing or things like that over the last several months have clients taken longer yes, they have definitely taken longer to make decisions and sign things.
In so confused would be the one word answer.
Okay. Thank you if I could sneak one more in how are you planning on getting handling your own internal revenue generating headcount growth in the different business. Yes, we are we're going after.
Revenue producers enterprise wide and then on the leverage side of it.
We're much more cautious.
Thank you.
Your next question comes from the line of Mark Marcon with Baird. Please go ahead.
Good afternoon.
One of my questions have been asked already but I'm just wondering when you talked about the July and August trends and obviously, we saw another quarter.
Sure Count could you talk a little bit about just it seemed like the pace of the news flow changed as you know as July and August and here in early September progressed did you see any sort of linear relationship.
In terms of that.
Flow of news and tweets.
And confusion and and how the business when in a more granular fashion.
July and August lumped together.
No I mean, you know look I.
You know July in terms of new business the year over year comparable was was obviously better the August year over year comparable was slightly lower I just I just not I cannot read anything in to one month I tend to look at things in two or three months and try to try to.
You know.
Gather what what that really means.
So no the pace the conversations the tone nothing like that changed.
Between July and August materially.
That would point to.
To kind of a different conclusion or direction. Yeah. This is Bob I would agree with Gary I think.
We look at July and August one month was up one month was down just their data points and we have been as a result of those changes we haven't decided to do anything differently internally. So.
Great and then with regard to.
Some of the business initiatives the things that you can control.
How would you describe just the brand integration and everybody working together now Gary under the Korn Ferry brand is it all completely unified as or.
In terms of.
The advisory business, and changing brands or to the local basis, and and and just the positioning of the firm, Yes, I think I think we have.
Gone way way past half way on that I I think that in terms of that one from strategy that we rolled out.
It was about.
It was about 15 months ago 18 months ago, I think you look at the at the at the data and and it would suggest well something seems to be working with your marquee account growth is better than the portfolio. The cross sells from search into consulting fee RPM. So professional search that that is working.
I think that the.
The image of the company over the last several months has changed too because.
A lot of people recognize the brand for what we did 50 years ago.
And they don't recognize the brand for what we do today you know.
Coaching you know 100000 people.
And so I actually I believe that the branding initiative that we did with the PBGA around the Korn Ferry tour.
The whole purpose of that is that that the tour that we're now sponsoring is all about development. It's all about how do you exceed your purse potential while you're exceeds your potential by given opportunity and that's fundamentally what Korn ferry is about in our capabilities today are well well well ahead of sometimes where the brand imagery is so I think that we have to continue to on the marketing side.
Make sure that the you know the the per sauna and the marketing image of the firm.
Truly reflects where we are today and I I think it's still.
Actually quite behind.
Well it seems like you've made a lot of progress [laughter] multiple factors, including handing out tour card, but it had to be fun.
Can you talk a little bit about.
Okay. If advance just in terms of how youre going to monetize that.
Well we've got.
So the thesis was when you started out in college and Youre going to be a career nomad you're going to work for a lot of different companies and nobody is really taking care of you versus your eyewear. We took our first job and we kind of felt like the company was going to take care of it. So the thought is.
People need to be able to exercise and grow so they need to be assessed they need coaching.
They need.
Development, they need advice Kerr advice, and maybe they need job placement.
And so we think that we've we think we can actually make inroads into kind of a b to C.
Community, having said that when we are going after that theres too theres really two.
Or so go to market routes, one is b to b to C. So we're going to businesses to associations.
That have thousands of members and offering our career services. So thats one go to market. The second is direct.
To consumer.
Right now that business is only look at its less than $10 million annually in revenue, but I think the thing that's interesting.
And I think it was Toby although I'm not 100% sure I think we can actually use that platform for our leadership development offering because that's one like where the RPL market. There's there's scale I mean, it's a big market well leadership training the training and development is also a big market, where you could have really big scaled engagement. So we're looking at that platform as a way and look this isn't going to happen next quarter by any stretch, but over a series of quarters. I think you could you could have do leadership development outsourcing LDL now well again, we're a long ways away from that but that would be the vision.
Good vision.
And then with regards to the.
Just the advisory business and what you ended up seeing in some of the markets where.
You know obviously the headwinds are little bit more challenging, but what's the scale of.
Of what you're seeing just in terms of.
The decline in terms of the business, whether it's Germany or China, just on the advisory business.
Yes so.
This is Bob on the advisory business.
In.
Again, I'll just focus on the big countries like in.
The UK.
We're actually seeing Q1 this year to Q1 last year.
It's kind of low single digit.
No growth.
UK overall is up but again a lot of that is driven by the ARPO.
That we talked about.
Germany.
Looking it in Q1 advisory was down a couple of percentage points, France was.
A large area for us in terms of being negative year over year was down only 21%.
Looking at China, China was.
China was down year over year low single digits.
So it's not it's not like we're seeing significant.
Erosion in any of those markets.
But we are feeling the feeling the headwinds.
Okay and then on the.
An executive search with regards to just the practices you mentioned financial services and industrial were up.
What were the.
Well the opposite side of the scale there in terms of.
Obviously everybody's curious about you know.
Some of the macro headwinds in May.
Well, we've seen for some time.
You know the impact on supply chains in China, and the carry on effect to industrial.
In North America, So thats been going on now for.
You know six or six or seven months.
So when you when you look at the the industry and financial services was good.
When you look in that obviously investment banking as you would guess was was down significantly but that was more than offset by commercial banking and private equity and real estate technology was very good. This last quarter life Sciences, and healthcare enterprise wide was down a few percentage points, but I don't I am not going to I would that it's probably not going to be sustainable I don't think there's anything you know underlying that.
Consumer has been flat or so so I you know, it's really been a you know it's really been a mix bag when you look at it.
Okay, and then with regards to just two more questions. If I may one.
On the IP professional search how big is that for you now and.
How quickly can you experiment.
It's less that you guys said, that's a very very good.
Certainly less than you know way less than $100 million.
And we think that market you know, it's always an art sizing these things, but we think that could be 20 billion dollar market.
And so cannot be seized in a quarter no, but could that be seized over four to six quarters.
You can make some real headwind there because there's not a lot to we've got the technology, we've got the process.
You know, it's pretty easy to get your mind around that.
Yep, and then with regards to.
No just the RPL business continuing to ramp.
It sounds like.
From everything every data point that we have the markets not growing as quickly I mean, you're clearly gaining share is that.
You say, that's a fair assessment I think thats right.
Not only are we gaining share my but when you look at when we come up for renewals.
It's two to quote the leader of that business that you can count on one hand.
The number of times and we've lost a renewal so I think we do a good job once we get in a being very very sticky.
Excellent and then lastly.
Buyback.
Sounds like you are clearly going to do that what's the authorization now and once the next board meeting like we've got a we've got a couple of hundred left on last authorization was 250 I think we spent almost 40.
First quarter in the first quarter than to date.
So we got a couple of hundred million got a couple of hundred million left.
Gary with the intent be to actually shrink the share count in a material way yes.
Because in the past, it's been kind of offset by.
Option grants and things of that nature, I think where this company is today and what we've got and yes. We will absolutely now again, we're also looking at acquisitions. So we've got to have a balanced mindset here, but today.
September Fiveth September five we're going to have more of an orientation towards.
Share repurchases.
And continuing to look at acquisitions.
Makes sense great. Thank you.
Our next question comes from the line of Marc Riddick with Sidoti. Please go ahead.
Hi, Good afternoon, I wanted to sort of continue on that being a little bit in as wondering in the context of some of the things that you've looked at can you sort of give shouldn't see.
Parameters or thoughts around the scale that you are comfortable with as far as potential acquisitions or maybe what you're seeing out there, but certainly it's been a few years since Hay group and I just wanted to get a sense of comfort level as to size and scope of potential acquisition targets.
I think it's always dangerous to kind of talk about that I would say that we've looked at things that would have grown our top line by 50%.
And we've also looked at things would you know.
Grow our top line by 5%.
So we've had a pretty we've had.
A pretty wide screen.
In terms of size and as you said it has been three and a half years.
But you know you don't want to do something just to do it it needs to fit culturally.
And it needs to come to make sense.
In the context of our overall strategy.
Okay, great that makes sense and then I just wanted to follow because a lot of my other questions were answered. So I just wanted to touch a little bit on the.
Marquee accounts and then the expansion into the regionals or the sort of wanted to get a sense of maybe the receptivity of those I guess it was 200 regional accounts and if there was any particular mix that we should be thinking about about the regionals. If they were heavily weighted in any particular way how we should be thinking about that in the initial thoughts on how that part of it. Thank you see I would say, we're you know we're not even out of the first standing on the regional account. So the the marquee accounts. It really took US you know.
You know a college degree I mean, it took us four years I think to to kind of really get that right and not that we have it right. We can continue to improve on it but I think you really got to look at this as a you know 234 year endeavor on the regional accounts. The the way that we did those we put a top down screen on it and then we did it obviously bottom up by region and the the geographic dispersion kind of is reflective of Korn ferry today, so you're going to find 40% and.
In the United States and you know.
30, or so in Europe , but then we did overweight Asia.
We purposefully overweighted Asia.
Just because of the size of some of those companies that are in China and the like.
But its early days.
You know for sure.
But I think that if you look at any world class professional services firm.
You know an anchor of that strategy would be having a you know a proactive go to market approach around you know real scaled loyal repeatable clients, where you can deliver impact where you can have hundreds of people working on the account.
And have real impact on those clients.
Okay, Great and then the last one for me I was wondering you did mention on this but I want to touch on that a little bit as far as the.
When you look at the the marketing the go to marketing approach and the global branding effort and that how far along you are with that including the the the tour and I was wondering are there any particular pieces that you would like to see sell in the remainder of that global branding efforts or are there any types of things you feel so that you're missing that you don't currently have thanks.
You know the way that you market you know there is a couple of things one is our digital insights business.
That has a different cadence and a different marketing strategy you have to be way more digital.
You have to do a lot of FCO.
And so we've got a whole you know path that we're we're going down there.
I think secondly.
We have capabilities today that completely out strep.
What most people think of us for so when you think about having the kind of data that we have 12000.
Our organizational benchmark data 69 million.
Assessments rewards data.
20 million in counting you know you kind of look at those numbers and what we're doing and that the market in general does it know that so I think we have to continue top down.
To you know to to message that purposefully.
And the Korn Ferry tour is clearly a big piece of that the B to C business.
Or the B to B to C business. The kickoff events also requires a different market strategy that is going to look a little bit more like our digital insights or or former product business, but you know.
Fourth ultimately is.
Good work begets, good work and so the quality of what we deliver.
Has to be top rate and it has to be top rate from CEO succession work that we do to the digital insight business to the Rps business and Theres Theres no nothing nothing that's better than doing high quality work.
Okay, great. Thank you very much.
You have a follow up from the line of Kevin Mcveigh with Credit Suisse. Please go ahead.
Great. Thanks.
Gary just any thoughts that you know would you expect the U.S. to kind a.
Reaccelerate in kind of help kind of Germany's franchises in the world China or are you starting to see any type of shift capacity out of China into other areas, where there could be some incremental demand given you know obviously it feels like a lot of countries to companies are starting to.
Plant away from China are you starting to see any early signs of that and then just again with the U.S. kind of moving along any re acceleration that helps kind to stabilize the business or you know how are you thinking about it from a planning perspective.
I think the current president has 10 or 11 months and it's going to be.
You know that stance versus China.
And I don't know who's going to win self interest or national interest Thats very hard to call.
So I'm I'm really thinking there was going to be.
Some malays for for a while and the supply chain to coupling that people have been going after now for six nine months.
It's a lot it's easy easier said than done.
For sure and it's just like trying to unwind a union thats been in place for 40 or 50 years. You can talk all you want but then actually trying to do it becomes very very difficult.
So I think the you know the good news is that as we've said central banks will become more accommodative.
I think that'll probably hopefully be be good for the for the U.S. consumer that drives this economy.
So it's not necessarily seeing a you know a cliff nor are we.
Saying a sudden.
30 mile an hour tailwind I, just I, just don't think thats realistic in the socio political environment. We're in right now.
That's helpful. And then you know again not so much on the size of deals, but would you expect them given the success and the RPL would they be along those lines or maybe something that would diversify the business a little bit more similar to what he or just any thoughts around.
How you are thinking from a strategic perspective as it relates to the core core business.
Well I think that there certainly is a question around whether you want to add more capabilities. So I would kind of call. It more general management consulting capabilities that could could be a question, but it's you know it's probably not a question thats executable in the shorter term, but I think longer term that is a strategic question for for the company I think in the in the shorter term.
There is.
There is a the leadership development is a.
No training and development is a big share of the market spend and so I think that you know if you could do something there too.
To to bolster what you have today that would probably be.
A very good thing I don't I don't think in assessment and succession.
We really need much I think we've got tremendous IP and it's just us figuring out a way to gamified or make it more interesting.
You know.
So I think in terms of our current capabilities organizational strategy, which tends to then get into general consulting could be interesting and leadership development.
Is interesting.
Thank you.
Do we have a follow up from the line of Tobey Sommer with Suntrust. Please go ahead.
Thanks, Gary I understand that you commented about having a a few opportunities that you are.
You know pursuing that Didnt transact.
Good in that transactions can change or not be consummated for a myriad of reasons.
Any kind of unifying factors there in terms of.
Multiples or anything like that that kept those from going across the finish line.
And have they transacted away from the company are they still out in the market.
Ones one is was never for sale.
So it's still in the market.
Another one transacted away from the company.
And I would I would say that.
You know it's.
You know a unifying factor as always it's always culture, we very much look culture, but in this case it was price.
And.
You know price, particularly given where our our valuation is today.
Thank you very much like color.
It appears there are no further questions Mr. burnison.
Okay, well look I like I said, it's going to be 50 years on November 14th and the company that Leicester corn and Richard Ferry started and.
And.
You know in Los Angeles, California are and in many respects the same from bye.
Actually you know quite different so we're excited about what we can do we're confident in our strategy and we thank you for your support we'll talk to you next time.
Say about bye.
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Okay, great. Thank you.
[noise].
You're welcome Mr. Burnison have a great day.