Korn Ferry

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 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 Form 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 gap 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 Mr. Burnison. Please go ahead, Mr. Burnison.

Okay, thanks, Greg, and thanks. 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 clearly driven by our RPO and professional search offering, which grew at 27% constant currency. And that's the 21st consecutive quarter growth. of double-digit growth for our RPO 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 million, and we continued to allocate capital to share repurchases. We bought back almost a million shares to date using about $40 million. 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&A integration. Our firm, Korn Ferry, not only helps organizations, but as importantly, teams, leaders, and individuals exceed their potential. That's what this company is all about, enabling people and organizations to indeed exceed their potential. In a couple months here, November 14th, it's going to mark our 50th 5.0 year in business. Out of this five-decade journey, I'm probably, and certainly I 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 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 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 is a business that we've basically just started, but it entails offering career advice to professionals. And in a 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 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 billion data points on professionals, 69 million assessments taken, and rewards data on over 20 million people and almost 25,000 companies. Clearly, that's Mr. Inside Baseball. And so that boutique firm of the past with long line of business today puts somebody in a job every three working minutes. Every month we develop over 100,000 individuals, and we've dramatically now shifted to a global firm with solutions that synchronize an organization's 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 and 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 outcomes. Business outcomes. So our go-forward strategy is going to, 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, 30%, 35%, 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&A, share repurchases, and dividends. And finally, innovating and monetizing our IP. An example would be the Corn Free Advance offering that we've got now. So I'm joined here with our CFO, Bob Rozak, and Greg Kowalczyk. 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. You know, 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 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%, and RPO and pro search up over 27%. Again, all measured at constant currency. Our earnings remained strong with EBITDA at approximately $75 million, which compared to adjusted EBITDA in the first quarter of fiscal 2019, was up $4 million 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 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, of the 66 million, approximately 32 million are 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 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 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 bonuses, our investable cash balance at the end of the first quarter was approximately $363 million, And that's 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. The board declared a dividend of $0.10. And as Gary mentioned, we repurchased about a million shares, spending just shy of $40 million dollars. 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 were $0.76. That's down $0.02 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. And I'll turn the call over to Greg to review operating segments in more detail.