Korn Ferry - Earnings Call - Q1 2020
September 5, 2019
Transcript
Speaker 0
Ladies and gentlemen, thank you for standing by, and welcome to the Korn Ferry First Quarter Fiscal Year twenty twenty Conference Call. At this time, all participants are in a listen only mode. 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.
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 twenty nineteen. 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.cornferry.com. With that, I'll turn the call over to mister Burnison. Please go ahead, mister Burnison.
Speaker 1
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 485,000,000, and that that growth was was clearly driven by our RPO and Professional Search offering, which grew at 27% constant currency.
And that's the twenty first consecutive quarter of double digit growth for our RPO and and Professional Search business. We saw revenue growth in all geographies, again, constant currency. Asia and South America were up 11%. EMEA was up 7%, and North America was up 5%. Earnings remained very strong.
EBITDA was about $75,000,000 and we continue to allocate capital to share repurchases. We bought back almost a million shares to date using about $40,000,000 Our financial results for the quarter, I think they really demonstrate the durability of our business model and whether that's driving our clients' organizational efficiency or delivering on an m and a integration. Our firm Korn Ferry not only helps organizations, but as importantly, teams, leaders, and individuals exceed their potential. And that's what this company is is all about, enabling people and organizations to indeed exceed their potential. You know, in a couple months here, November 14, it's gonna mark our fiftieth five o year in business.
And out of this five decade journey, I'm probably and it certainly haven't been here for all fifty years, but I've been here for a good seventeen or eighteen. 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 we've got room headroom in the marquee 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 KF 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 82,000 professionals who are benefiting from, to date, about 11,000 coaching sessions. And I I think we're building the world's career gymnasium for people to exercise their career fitness.
And so that single Rolodex that Lester Korn and Richard Ferry started this great firm with many years ago has been transformed into arguably the world's most comprehensive people in organizational databases. I mean, we've got organizational benchmark data on 12,000 entities, 4,000,000,000 data points on professionals, 69,000,000 assessments taken, and rewards data on over 20,000,000 people and almost 25,000 companies. Clearly, that's mister Inside Baseball. And so that boutique firm of the past with one line of business today puts somebody in a job every three working minutes. Every month, we develop over a 100,000 individuals, and we've dramatically now shifted to a global firm with solutions that synchronize an 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 enables people in organizations to be more than, 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 outcomes. So our our go forward strategy is gonna, you know, comprise, you know, really five pillars. One, an enterprise go to market approach with clients of scale, creating a portfolio of house accounts.
We'd like to see them be, you know, thirty, thirty five, 40% of our portfolio. Two, 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. Four, a disciplined approach to capital, including m and a, share repurchases, and dividends. And finally, innovating and monetizing our our our IP.
An example would be the Korn Ferry Advance offering that we've got now. So I'm joined here with our CFO, Bob Roszak and Greg Kovacek. So Bob, I'll turn it over to you.
Speaker 2
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 in driving meaningful business outcomes for our clients. Fee revenue in our just completed first quarter grew to almost 485,000,000, 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%, and RPO and pro search up over 27%. Again, all measured at constant currency. Our earnings remain strong with EBITDA at approximately $75,000,000, which compared to adjusted EBITDA in the '19 was up $4,000,000 or or about 5.8%. Our profitability also improved with EBITDA margin reaching 15.5% compared to an adjusted EBITDA margin last year in 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 RPO and ProSearch services remained strong in the first quarter with total new business awards of $97,000,000 consisting of 31,000,000 of new ProSearch assignments and 66,000,000 of longer term recruitment outsourcing contracts. Now of the 66,000,000, approximately 32,000,000 are new logos or new clients with approximately 34,000,000 of the extensions and renewals making up the difference. Also of particular note, in the first quarter, we had strong RPO 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 $567,000,000, and that's up about 67,000,000 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 $363,000,000, and that's also up about 67,000,000 year over year. We had outstanding debt at the end of the first quarter of about 223,000,000. As Gary indicated, we did stay on path with our balanced approach to capital allocation. The board declared a dividend of 10¢.
And as Gary mentioned, we repurchased about a million shares spending just shy of $40,000,000. And currently, have about 213,000,000 remaining on our authorization for share repurchases. And finally, fully diluted earnings per share in the first quarter were 76¢. That's down 2¢ 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.
Speaker 3
Okay. Thanks, Bob. Global executive search fee revenue in the '20 was $193,200,000, 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%, while our life sciences, health care, 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 1,360,000.00, and and the number of new search assignments opened worldwide in the first quarter was 1,695, which was essentially flat year over year. EBITDA for Executive Search in the first quarter was $48,900,000, up $2,100,000 or over 4.6% year over year. The consolidated EBITDA margin for Executive Search in the '20 was 25.3% compared to 24.2% in the first quarter of fiscal nineteen. Now turning to advisory.
In the first quarter, global advisory fee revenue was $195,500,000, which grew 3% year over year measured at 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 were up approximately four percent 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 $34,600,000 with with a 17.7% margin, both flat year over year. Finally, growth in the for RPO and Professional Search continued at a high double digit pace in the first quarter of fiscal twenty.
In the first quarter, RPO and Professional Search generated a record high $94.95800000.0 dollars 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, RPO and Professional Search was awarded another $97,000,000 of global new business consisting of $66,000,000 of longer term recruitment outsourcing contracts and 31,000,000 of shorter professional search assignments. Earnings and profitability for RPO and Professional Search continued to grow with revenue in the first quarter. EBITDA grew to $16,100,000 up $3,600,000 or nearly 29% year over year, and EBITDA margin improved year over year to 16.8%.
Now turn the call back over to Bob to discuss our outlook for the second quarter of fiscal twenty.
Speaker 2
Okay. Thanks, Greg. Across all service lines, global new business growth in July and August combined, was up 7% at constant currency led by RPO and 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 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 combined measured year over year at constant currency was up approximately 5%. For RPO, both business under contract and the pipeline of potential new business opportunities remain strong, and we expect growth to continue in the second quarter. Now considering these factors and assuming worldwide economic conditions, financial markets, and foreign exchange rates remain steady, we expect our consolidated fee revenue in the '20 to range from 485,000,000 to $505,000,000, and we expect our consolidated diluted earnings per share to range from 76¢ to 84¢.
That concludes our prepared remarks, and we would be glad to answer any questions you may have.
Speaker 0
And ladies and gentlemen, if you'd 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 queue, and you may remove yourself from queue at any time by pressing the pound key. If you're using a speakerphone, please pick up the handset before pressing the numbers. And our first question comes from the line of Kevin McVeigh with Credit Suisse. Please go ahead.
Your line is open.
Speaker 4
Great. Thanks so much. Hey, 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 and I look back, it looks like typically you have, you know, anywhere from a 30,000,000 to $50,000,000 uptick. The the kinda lower end of the range would imply kinda flat, higher end, a little bit of an uptick. I guess, what's the gating factors on that, number one? And then, what what's the tax rate, or is there anything else that's kinda impacting the EPS in q two, I guess, just relative to to where the revenue is?
Speaker 2
Yeah. So I would say the, you know, the the gating factors, when you look across, know, you know, what's happening in the different geographies, You have, you know, trade wars with China. You have, you know, Brexit, who knows where that's gonna end up, you know, technical recession in Germany. So, you know, those are some of the factors that are are weighing a little bit on our q two guide. You know, we're we're experiencing the softness in the geographies or countries where you would expect to see that.
You know, in terms of the the guidance, the EPS guidance, it's really not the tax rate. The tax rate is is really no different than what we had talked about. You know, previously, I think it's gonna be 25 to 27% in that range generally. But, you know, we continue to be very bullish on our business. We're we believe deeply in our strategy, and, you know, we're just continuing to execute on on our balanced approach to capital allocation, which, you know, 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, introduce the regional accounts, you know, those are areas where we're we're investing back in at this point. And, Kevin, if you if you step back and look at our marquee accounts, you know, Gary indicated they're about 21% of our revenue. Well, those accounts in q one where it's a more mature program grew 9% in constant currency. So, you know, that growth rate continues to outpace the rest of the company, and that's where we're that's where we're making our investments.
Speaker 4
Got it. And is that just, I guess, the only thing along those lines too, was the advisory headcount, it looked like it was down quarter to quarter if I picked that up right. Anything there looked like it was went to $5.63 from $5.77. Was that just anything anything was that just maybe certain regions that are a little bit weaker?
Speaker 1
The, you know,
Speaker 2
the advisory headcount actually, I think, went up quarter to quarter, Kevin. Do you have Greg, do you have the number there?
Speaker 3
Yeah. So I'm not sure what you're referring to, Kevin, but, in the slides that we posted, you know, on our website, we now county consultants and execution staff in in the quarter and it was 1,758. And in the prior quarter so sequential quarter was 1,699.
Speaker 2
Yeah.
Speaker 3
So it's actually up.
Speaker 2
Yeah. Yeah. It's up, Kevin. And, Kevin, what we've what we've done is we've really shifted away from just, calling out the, what we call, the fee owners or the consultants in the advisory space. That's really taking 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, you know, the staff on hand to execute the work. So we've gone to a a a different defined number, if you will, in terms of what we're communicating now.
Speaker 4
Got it. And I'm sorry. I was maybe I had I had the wrong I was looking at slide number 12 where it it looked like it went from five seventy seven to five sixty three, the number of consultants and professional staff.
Speaker 0
Yeah.
Speaker 5
Okay. I
Speaker 2
don't We we can Kevin, why don't we take that offline?
Speaker 4
Sorry about that. Maybe I picked it up wrong. Okay. Thank you, guys. Okay.
Speaker 0
And our next question comes from the line of George Tong with Goldman Sachs. Please go ahead.
Speaker 6
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 reaccelerate the growth towards your longer term growth target of 10 to 15%?
Speaker 1
Well, I think you you would sit there and you'd you'd look at several factors. Number one, when we have built that business, which was $8,000,000 not that long ago, today it's over 800,000,000. When you look at that business, particularly the last investment we made in the Hay Group, substantial 80% of that business was outside The United States, which was great, at that point. Where we are today is is the first thing you've gotta do is to increase the the scale of The US business. So that's something we're working on very, very hard, and and you'll see that Bob commented on the new business that we saw in consulting in North America, you know, with double double digit.
Very, very impressive. So that would be one. Number two is, for
Speaker 0
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
Speaker 1
two. One. The third is around our IP, and we've got to continue to digitize that IP, and create that more scalable lift in revenue. So those are really the, you know, the primary three avenues excluding m and a, that were going down.
Speaker 6
Very helpful. If we switch gears and look at the RPO business, that segment grew 27% constant currency, very strong. Can you dissect how much of this growth is being driven by an unpenetrated market versus new product and sales initiatives that you're internally executing upon?
Speaker 1
I'll I'll let Bob give the numbers. I'm gonna say both. I'm gonna say, you know, the interesting professional search business is I, you know, we made a a purposeful decision to go after on the professional search side IT, technical skills. And, you know, we think that market is at least $20,000,000,000, maybe $30,000,000,000. 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 get into staffing, but it's an interesting you know, we've we've had very, very good results there. And I think back to the RPO business, the combination of our IP that we have coupled with the technology has just been killer. So, Bob, I don't know if you wanna put any Yeah.
Updated stuff.
Speaker 2
Yeah. So I I think Gary's right, George. I think it's I think it's both. As he indicated, they're you know, the the ProSearch, the emphasis on IT, on on professional sales individuals, I think, is paying those investments are paying off. And listen, on the RPO side, you know, they continue to use you heard Gary talk about all the the IP that we have at the sort of center of our our company and they continue to different differentiate their product offering by leveraging that IP into their RPO service offering.
And then, you know, other folks can generate a lot of resumes, but we can generate resumes that line up with what good looks like in organizations. You know, 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. And the
Speaker 1
other thing that's interesting is that, I don't like to use the word cross sell, but I would I would say, you know, the the deeper multiline, offerings to, you know, the single clients. 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 in other words, 20% of the consulting new business revenue came from primarily not all, but primarily search. If you look at the RPO business, it was 37%.
If you look at the professional search business, it was 52%. And then when you look at the other lines of business into search, it was only six. So clearly, there's opportunity there. But I think that that one firm strategy is is actually you know, it's it's not just a story. It's it's reality.
You know, you'd look at those numbers and say, well, you know, something's working, and and you have more opportunity.
Speaker 2
Yeah. And, George, this is Bobby. And last point I would add, the thing that I found very interesting is we were looking at the results for the quarter and then we started to understand August as it played out. You know, we had RPO, you know, good new business wins in both July and August in China and in Germany. So, again, you look at those marketplaces and, you know, you expect there to be, you know, some headwinds there, but we we actually saw the RPO with some strength, which kinda runs to the whole countercyclical theory that we've been talking about.
Speaker 6
Got it. Very helpful. Thank you.
Speaker 0
And our next question comes from the line of Tobey Sommer with SunTrust. Please go ahead.
Speaker 7
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 winter. I I don't know. You know, up 7% in constant currency equates to winter, but how are you feeling?
Speaker 1
I, I I think, you know, we're gonna be very, active in repurchasing our stock. I just plain out, I think the value I think the the platform that we have today and you think about the amount of profit that comes from a product business that's more durable. When I look at comps and I see what they're 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 is not as cyclical.
I look at comps at that on multiples on that, then I go to the RPO business and run multiples, and we're gonna be more aggressive in buying back stock. In terms of the acquisitions, yeah, we're we are very active. We you know, this last, you know, three or four months, we had three or four that we were very, very close to, and and we decided not to go forward. So we're gonna you know, I I do believe in that, and I don't know if it's fall. Clearly, there's, economic malaise.
That's gonna continue. I I I wouldn't I'm not gonna say it's fall, but we are gonna have the orientation of investing into winter. Yes.
Speaker 7
Okay. Thank you. Could you talk about, you know, 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, you know, some efforts in recent years, but I was hoping you could kinda update us on how those are going and what future, levers you I have to pull.
Speaker 1
Yeah. I think it's, you know, it's a couple things. It's it's, you know, you've you've gotta make sure you're you're picking the right, you know, accounts. You've gotta have the right kind of governance. You've gotta have the right kind of process, and 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, you know, two, three, or four accounts. And I think now we, you know, we don't have a 100 of them, but it's close. And so we've we've made a a purposeful effort there. So I think it's it's kind of will and skill. So, on the capability side, I think we have to do, we've got the RPO offering, that scale.
There's no doubt about that working. We can deliver it anywhere. The leadership development, you know, the training area is a big, big market, and we've gotta do a better job there of of of creating platforms for individuals to grow and learn that can be, you know, sold to to to those marquee accounts. You know? Now you may wanna call that leadership development outsourcing, but that's that's actually big dollars and scaled engagement.
So one of the things that's interesting about this KF Advanced business, which, you know, 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 that's, yeah, very tactical, but I think it gives you kind of a a practical element of, you know, some of the things you have to believe in.
Speaker 7
Great. Last question for me.
Speaker 4
Could you talk about
Speaker 7
what you're hearing from clients? Because, on an overall basis, the the some of the international revenue growth and for reasons, I think, Bob cited, it it has been slower than in The US, but but then you kind of mentioned new business in a couple of sore spots as being fine in August. So what are those conversations like? What are you hearing?
Speaker 1
I would say in one word, confused. It's it's it's an absolute you know, it's it's it's a crazy environment. There's economic malaise and confusion. And, you know, one tweet moves the market. Somebody's comment moves the market 500 points is preposterous.
So, you know, you can't undo the relationship with Britain and the EU that was done over fifty years. You don't undo that in you can't look. That it hasn't been done in three years. It's not gonna be done in three months. You could you could make the same argument around the, you know, the the trade issues, you know, when those get solved.
So I I would say it is confused. The consumer, though, ultimately in The United States seems to be very, very strong. You know, productivity is okay. Rates are going lower. That'll help people that have mortgages.
They'll be able to spend more money. So there's no, you know, there's no I haven't seen, you know, real talk around downsizing or things like that. Over the last, you know, several months, have clients taken longer? Yes. They've definitely taken longer to make decisions and and sign things.
And so confused would be the one word answer.
Speaker 7
Okay. Thank you. If I could sneak one more in, how are you planning on handing handling your own internal revenue generating headcount growth in the different businesses?
Speaker 1
Yeah. We are, we're going after, revenue producers, enterprise wide. And then on the leverage side of it, we're much more cautious.
Speaker 7
Thank you.
Speaker 0
The next question comes from the line of Mark Marcon with Baird. Please go ahead.
Speaker 5
Good afternoon. A lot of my questions have been asked already, but I was just wondering, when you talked about the July and August trends, and obviously, we saw how the quarter shook out, could you talk a little bit about this you know, it seemed like the the pace of
Speaker 0
the news
Speaker 5
flow changed as as the you know, as July and August and and here in early September progressed. Did you see any sort of linear relationship, you know, in terms of that, you know, that flow of news and tweets and confusion and and how the business went in a more granular fashion this July and August lumped together?
Speaker 1
No. I mean, you know, look. I I you know, July in terms of new business, the year over year comparable was was, you know, obviously better. The August year over year comparable was, you know, slightly lower. I'm I just I I just not I cannot read anything into one month.
I tend to look at things in two or three months and, you know, try to try to, you know, gather what what that really means. So, no, the the the pay you know, the conversations, the tone, not nothing like that changed between July and August materially. That would point you to kind of a different conclusion or direction.
Speaker 2
Yeah. Mark, this is Bob. I I would agree with Gary. I think, you know, we look at July and August as one month was up, one month was down. It's just their data points.
And we haven't as a result of those changes, we haven't decided to do anything differently internally. So
Speaker 5
Right. And and then with regards to, you know, some of the the business initiatives that you know, things that you can control, How would you describe just the the brand integration and everybody working together now, Gary, and under the Korn Ferry brand? Is it all completely unified as a you know, in terms of the advisory business and changing brands at the at the local basis and and and and just the positioning of the firm?
Speaker 1
Yeah. I think I think we have gone way way past halfway on that. I I think that in terms of that one firm strategy that we rolled out, it was about, you know, was about fifteen months ago, eighteen months ago. I think you look at the at the at the data, and and it would suggest, well, something seems to be working. If your marquee account growth is is better than the portfolio, the cross sells from search into consulting, RPO, professional search, that that is working.
I I think that the the image of the company over the last, you know, several months has changed too because a lot of people recognize the brand for what we did fifty years ago. And and they don't recognize the brand for what we do today, you know, coaching, you know, a 100,000 people. And so I I actually I believe that the the branding initiative that we did with the PGA around the Korn Ferry tour, The the whole purpose of that is that that that the tour that we're now sponsoring is all about development. It's it's all about how do you exceed your potential. Well, you exceed your potential by given opportunity, And that's fundamentally what what Korn Ferry is about.
And 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 the persona and the marketing image of the firm, truly reflects where we are today. And I, you know, I I think it's still actually quite behind.
Speaker 5
It it seems like you've made a lot of progress on multiple facets including handing out tour cards, so that had to be fun. Can can you talk a little bit about KF Advance just in terms of how you're gonna monetize that?
Speaker 1
Well, we've got so so the the thesis was you start out in college, and you're gonna be a career nomad. You're gonna work for a lot of different companies and nobody's really taking care of you versus you or I where we took our first job and we kinda felt like the company was gonna take care of us. So the thought is, you know, people need to be able to exercise and grow. So they need to be assessed. They need coaching.
They need, development. They need advice, career advice, and maybe they need job placement. And so we think that we've we we think we can actually make inroads into kind of a b to c community. Having said that, when we're going after that, there's two there's 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, you know, thousands of members and offering our career services. So that's one go to market. The second is direct, to consumer. Right now, that business is only you know, look. It's it's less than $10,000,000 annually in revenue.
But I think the thing that's interesting, and I think it was Toby, although I'm not a 100% sure. I I I think we can actually use that platform for our leadership development offering because that's one like, where the RPO market, there's there's scale. I mean, it's a big market. Well, leadership training, the you know, 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 it look. This isn't gonna happen next quarter by any stretch. But over a series of quarters, I I think you could you could have do leadership development outsourcing, LDO. Now we're again, we're a long ways away from that, but that would be the vision.
Speaker 5
Good vision. And then with regards to the just the advisory business and and what you ended up seeing in some of the markets where, you know, obviously, the headlines are a little bit more challenging, what what's the scale of of what you're seeing just in terms of the the decline in terms of the business, whether it's Germany or or China, just on the advisory business.
Speaker 2
Yeah. So and, Mark, this is Bob. On the advisory business in yeah. I'll just focus on on the the the big countries like in, you know, The UK. We're actually seeing, you know, q one this year to q one last year.
It's, you know, kinda low low single digit growth. UK overall is up, but, again, a lot of that's driven by the RPO that we talked about. You know, Germany, looking at in q one, advisory was down, you know, a couple percentage points. France was a a large area for us in terms of being negative. Year over year was down, like, 21%.
Know, looking at China, China was China was down year over year, low single digits. So it's not it's not like the you know, we're we're seeing significant erosion in any of those markets, but we are feeling the we are feeling the headwinds.
Speaker 5
Got it. And and then on the on executive search with regards to just the the practices, you mentioned financial services and industrial were up. What were the what's the opposite side of the scale there in terms of the obviously, everybody's curious about, you know, some of the macro headwinds and the the impacts.
Speaker 1
Well, we've seen for for some time, you know, the the impact on supply chains in China and the carry on effect to industrial, in North America. So that's been going on now for, you know, six or six or seven months. So, you know, when you when you look at the the industry and financial services was good, when you look in that, obviously, banking, as you would guess, was was down significantly, but that was more than offset by, you know, commercial banking and private equity and real estate. Technology was very good. This last quarter, life sciences and health care enterprise wide was down a few percentage points, but I don't I you know, I'm not gonna I would that is probably not gonna be sustainable.
I don't think there's anything, you know, underlying that. Consumer has been, you know, flat or so. So I you know, it's it's really been a, you know, it's it's really been a mixed bag, when when you look at it.
Speaker 5
K. And then with regards to just two more questions, if I may. One, on the IT professional search, how big is that for you now, and how quickly can you expand that?
Speaker 1
It's less yeah. It's that's a very, very good question. It's certainly less than, you know, way less than a $100,000,000. And we think that market, you know, it's always an art sizing these things, but, you know, we think that could be $20,000,000,000 market. And so, you know, can that be seized in a quarter?
No. But could that be seized over four to six quarters? You could make some real headwind there, because there's not a lot of we've got the technology. We've got the process. You know, it's it's it's pretty easy to get your mind around that.
Speaker 5
Yep. And and then with regards to, you know, just the RPO business continuing to ramp, know, it sounds like from everything every data point that we have, the market's not growing as quickly. I mean, you're clearly gaining share. Is is that you said it's a fair assessment?
Speaker 2
I think that's right. Not only are we are we gaining share, Mark, but when we look at when we come up for renewals, it's it's you know, to to to quote the leader of that business, it's you can count on one hand the number of times when we've lost a a renewal. So I I think we do a good job once we get in of being very, very sticky.
Speaker 5
Excellent. And then lastly, buyback, you know, it sounds like you're clearly gonna do that. How what's the authorization now? And when's the next board meeting?
Speaker 1
I think we got a we got a couple 100 left. Last authorization was $2.50. I think we spent almost 40 first in the first quarter then to to date. So we got a couple 100,000,000. We got a couple 100,000,000 left.
Speaker 5
Gary, would the intent be to actually shrink the share count in a material way?
Speaker 4
Yes.
Speaker 5
Because in the past, it's been kind of offset by, you know, option grants and things of that nature.
Speaker 1
I think where this company is today and and what we've got and and I yes. We will absolutely. Now, again, we're also looking at at acquisitions. So, you know, we've we've gotta have a balanced mindset here. But today, September 5, if this this is September 5, we're gonna have more of an orientation towards share share repurchases, and and continue to look at acquisitions.
Speaker 5
Makes sense. Great. Thank you.
Speaker 0
Our next question comes from the line of Mark Riddick with Sidoti. Please go ahead.
Speaker 8
Hi. Good afternoon. I wanted to sort of continue on that vein a little bit. And and wondering in the context of some of the things that you've looked at, can you sort of give some some some parameters or thoughts around the the scale that you're comfortable with as far as potential acquisitions and maybe what you're seeing out there? Certainly, it's been a few years since Hay Group, and I just want to get a sense of comfort level as to size and scope of potential acquisition targets.
Speaker 1
You know, I think it's always dangerous to 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 that would, you know, grow our top line by, you know, 5%. So we've had a pretty you know, we we've had a pretty wide screen, in terms of size. And as you said, it has been, you know, three and a half years. But, you know, you don't wanna do something just to do it.
It it needs to fit culturally, and it needs to to to make sense, in the context of our overall strategy.
Speaker 8
Okay. Great. That makes sense. And then I just wanted then follow because a lot of other my other questions were answered. So I just wanted to touch a little bit on the the marquee accounts and then the the expansion into the regionals.
I sort of wanted to to get a sense of maybe the receptivity of those, I guess, was 200 regional accounts and and if there was any particular mix that we should be thinking about about the regionals, if they were heavily weighted any particular way, how how we should be thinking about that in the initial thoughts on how that part of it's gone? Thank you.
Speaker 1
The I would say we're, you know, we're not even out of the first inning on the regional account. So the the marquee account, it really took us, you know, you know, a college degree. I mean, it it took us four years, I think, to to kinda really get that right. And not that we have it right, we can continue to improve on it. But I I think you really gotta look at this as a, you know, two, three, four year endeavor on the regional accounts.
The the the way that we we did those, we 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 gonna find 40% in, in The United States and, you know, 30 or so in Europe. And then we did overweight Asia. We purposefully overweighted Asia just because of the size of of some of those companies that are in China and the like.
But it's it's 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, you know, impact, where you can have hundreds of people working on the account, and have real impact on those clients.
Speaker 8
Okay. Great. And then the last one for me. I was wondering, you did mention on this, but I want to touch on it a little bit as far as the, when you look at the, the marketing, the go to marketing approach and and the global branding effort and that, you know, how far along you are with that, including the the the the tour. And I was wondering, are there any particular pieces that you would like to see fill in the remainder of that global branding effort?
Or are there any types of of of things you feel as though that you're missing now that you don't currently have? Thanks.
Speaker 1
You know, the way that you market, you know, there there's a couple things. One is our digital insights business. That that has a different cadence and a different marketing strategy. You have to be way more digital. You have to do a lot of SEO.
And so we've got a whole, you know, path that we're we're going down there. I I think, secondly, we have capabilities today that completely outstrip what most people think of So when when you think about having the kind of data that we have, 12,000, you know, organizational benchmark data, you know, 69,000,000 assessments, Rewards data, you know, 20,000,000 and and counting. You know, you kinda look at those numbers and what we're doing. And the the the market in general doesn't know that.
So I I think we have to continue top down, to, you know, to to to to message that purposefully. And the Korn Ferry tour is is clearly big piece of that. The the b to c business or the b to b to c business, the KF Advance, also requires a different market strategy in that it's it's gonna look a little bit more like our digital insights or or our former product business. But, you know, fourth, ultimately is, you know, good work begets good work. And so the quality of 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 RPO business.
And there's there's no nothing nothing that's better than doing high quality work.
Speaker 8
Okay. Great. Thank you very much.
Speaker 0
We have a follow-up from the line of Kevin McVeigh with Credit Suisse. Please go ahead.
Speaker 4
Great. Thanks. Hey, Gary. Just any thoughts. You know, would you expect The US to kinda reaccelerate and kinda help kinda the Germany's, France's of the world, China?
Were you starting to see any type of shift to 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 companies are starting to plan away from China. Are you starting to see any early signs of that? And then just, again, with The US kinda moving along, any reacceleration that helps kinda stabilize the business, or, you know, how are you thinking about it from a planning perspective?
Speaker 1
I think the current president has ten or eleven months, and it's going to be, you know, that stance versus China. And I don't know who's gonna win, self interest or national interest. That's very hard to call. So I'm I'm really thinking there's gonna be, some malaise for for a while. And the supply chain decoupling that people have been, you know, going after now for six, nine months, you know, it's a lot it's it's easy easier said than done, for sure.
And it's just like trying to unwind a union that's been in place for forty or fifty 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 the good news is that, you know, as we've said, central banks will become more accommodative. I think that'll probably, hopefully be be good for the for The US consumer that drives this economy. So, you know, I'm it's not necessarily seeing a, you know, a cliff nor are we, you know, seeing a sudden, you know, 30 mile an hour tailwind.
I just I just don't think that's realistic in the sociopolitical environment we're in right now.
Speaker 4
That's helpful. And then, you know, again, not so much on the size of deals, but would you expect them given the success in the RPO? Would they be along those lines or maybe something that would diversify the business a little bit more similar to what Hay or just any thoughts around how you're thinking from a strategic perspective as it relates to the core core business?
Speaker 1
Well, I think that there certainly is is a question around, whether you want to add more capabilities. I you know, kinda call it more general management consulting capabilities. That that that could could be a question, but it's, you know, it's probably not a question that's executable in in the shorter term. But I think longer term, that is a strategic question for for for the company. I think in the in the shorter term, there is, you know, there is a the leadership development is a, you know, training and development is is a big share of the market, spend.
And so I I think that, you know, if you could do something there to to to bolster what you have today, that would probably be, a very good thing. I don't I don't think in 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 gamify it or make it more interesting. You know? So I 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 is interesting.
Speaker 4
Thank you.
Speaker 0
And we have a a follow-up from the line of Toby Summer with SunTrust. Please go ahead.
Speaker 7
Thanks. Gary, I I understand that you commented about having a a few opportunities that you were, you know, pursuing that that you didn't transact could and 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 that kept those from going across the finish line? And have they transacted away from the company, or are they still out in the market?
Speaker 1
One's 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 is always it's always culture. We we we very much look at culture. But in this case, it was price.
And, you know, price, particularly given where our our valuation is today.
Speaker 7
Thank you very much for the color.
Speaker 0
It appears there are no further questions, mister Burnison.
Speaker 1
Okay. Well, look. I like I said, it's it's gonna be fifty years on November 14, and the company that Lester Korn and Richard Ferry, you know, started in in, you know, in Los Angeles, California are in, you know, many respects the same firm, but, actually, you know, quite different. So we're 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. See you. Bye bye.
Speaker 0
Ladies and gentlemen, this conference call will be available for replay for one week starting today at 06:30PM eastern time running through the day, September 12, ending at midnight. You may access the AT and T executive playback service by dialing +1 804756701 and entering the access code 470062. International participants may dial +1 (320) 365-3844. Additionally, the replay will be available for playback at the company's website, www.kornferry.com, in the Investor Relations section. That does conclude our conference for today.
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