Korn Ferry

Ladies and gentlemen, thank you for standing by and welcome to the Korn Ferry fourth 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 cornferry.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 continuation statement to our investors. Certain statements made in this call today, such as those relating to future performances, performance plans and goals, constitute forward-looking statements within the meaning of the Private Securities Legislation 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. Additionally, information concerning such risks and uncertainties can be found in the release relating to this presentation and in the periodic and other reports filed by the company with the SEC, including the company's quarterly report for the quarter ended January 31st, 2020, the company's current report on form 8K filed on May 11th, 2020, and the company's soon to be filed annual report for fiscal year 2020. Also, some of the comments today may reference non GAAP financial measures such as constant currency amounts, EBITDA, and adjusted EBITDA. Additionally, information concerning these measures including reconciliations to most directly comparable GAAP financial measure is contained in the financial presentation and earnings release relating to this call. 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. Bernenson. Please go ahead, Mr. Bernenson.

Okay. Thank you, Amy, and good afternoon, everybody, and thanks for joining us. You know, the last several months, are unlike anything most of us have experienced in our lifetimes. With long overdue calls for social equality, persistent global pandemic and recovery curves, the only certainty today is uncertainty. But, you know, amid all this change, we'd be remiss not to recognize all the heroes. You know, it's been truly uplifting to see the humanity around us. Our healthcare workers, and other first responders and all of those who are committed to making our world a safer, better, and more equal place. I've never been more proud of our firm and how we've responded during these times. At the beginning of this pandemic, we adopted a framework of safety, caution, and agility to navigate the crisis. That included mobilizing almost all of our global colleagues to work from home environment, in really the course of days. And we sized our business to the current reality while preserving tremendous muscle, which we believe will allow us to accelerate through the term. We took a strong voice in the world, hosting multiple COVID-19 webinars, which were attended by over 20,000 leaders. And we led Race Matters webinars for colleagues and clients that attracted more than 100,000 leaders from global organizations. And we're continuing to engage with clients in these discussions, given our large diversity and inclusion consulting business. And we appointed Mike as our chief diversity officer, elevating our ongoing focus on and continuing commitment to not only diversity, but much more importantly, inclusion. You know, diversity is a fact. Inclusion is a behavior. And we're committed to continuing that conversation beyond the pledge through action. Now, let me comment briefly on our fiscal fourth quarter. Fee revenues were down about 7.9% at constant currency as the impact of the virus accelerated through the quarter. Our adjusted EBITDA margin was almost 16% and we delivered 60 cents of adjusted EPS. Full-year revenues were $1.9 billion, and we delivered approximately $300 million of adjusted EBITDA and $2.92 of adjusted EPS. Now for the future. There's no question that the magnitude of the humanitarian and economic impact brought on by the virus far outweighs what anyone could have expected a few short months ago. The pace and magnitude of the decline caused by this global health crisis is unprecedented, at least in the last hundred years. But with the crisis, there's also tremendous opportunity. And we believe that includes real tangible opportunities for corn. You know, almost every company on the planet is, and will have to reimagine their business. And I believe in the next two years, there's going to be more change than in the last 10. Quite simply, different work needs to get done, and work needs to get done differently. And to get work done differently, companies will need to rethink their org structure, roles, and responsibilities, how they compensate, engage, and develop their workforce, let alone the type of talent they hire and how they hire that talent in a virtual world. which will depend to even a greater extent on assessment. And as a reminder, our assessment and learning business is almost 25% of the company. So these are Korn Ferry's businesses, and this is on top of our M&A change management, virtual sales effectiveness, and customer experience services, let alone the D&I services that we offer to the marketplace. That's real opportunity for us. And as an organizational consulting firm, we enable people and organizations to exceed their potential. And to exceed potential, people need an abundance of opportunity, development, and sponsorship, which is absolutely foundational to our service offerings. We're also using this time of change as an opportunity to reimagine our business. For example, we're moving from analog to digital delivery of our assessment and learning business, which, as I just mentioned, it's 25% of the company, in a way that makes our IP more relevant and scalable. On the recruiting side, we're further refining our platform processes, such as AI, video, and technology. And on the administrative front, we're continuing to further consolidate our activities, adopting a one contrary approach to deliver greater efficiencies across the entire organization. When I look back during the Great Recession, our revenue was up almost 60%, four quarters from the trough, eventually growing 5x to almost 2.1 billion annual revenue run rate a few months ago. We believe the opportunity to grow after the pandemic subsides lies in front of us. We're a much different company today. Our firm's recovery could be substantially different with a pronounced upswing based on a broader and deeper mix of business. To undertake this journey, we're going to be agile, flexible, and responsive to the environment and our clients. Fortunately, we're facing this crisis from a position of strength when you consider we have a solid balance sheet with high levels of cash and liquidity, and we've taken swift and decisive actions to protect the company and more importantly, preserve its muscle. We've also seen some green shoots in new business and client wins. April, May, and June stabilized down approximately 30% year over year, and sequentially, June was up approximately 18% over May. So June was better than May, and May was better than June in terms of new business. We've also set operational guardrails in our business designed to preserve our position of strength and enable the firm to invest into the recovery. We're committed to maintaining at least neutral EBITDA. This preserves the muscle of the firm and our ability to fully harness the opportunities in the recovery, and we will maintain our dividend this quarter. As we discussed in the last earnings call, we continue to assess the changing health and economic environment and the impact it has on our forward visibility. As cities, states, and countries reopen their economies, there's been a significant resurgence of COVID-19 cases in a number of places. In some cases, this has resulted in the delay or even cancellation of plans to reopen. Despite the recent positive data indicating that our new business trends may be stabilizing, as well as the resilience that our clients and colleagues are demonstrating, the near-term predictability of our business remains clouded. As a result, we will not be providing specific revenue and earnings guidance for the first quarter of FY21. In wrapping up my remarks, I want to leave you with this. You know, at some point, we'll be looking at this virus through the rearview mirror. And I truly believe that we have the right strategy with the right people at the right time to accelerate through the turn like we've done before. We have a demonstrated track record of doing that. So now I'm joined virtually by Bob Rozak and Greg Kowalczyk, and I'll turn it over to you, Bob.

Thanks, Gary, and good afternoon, good morning, everyone. I'll start with a few important highlights for the full year and the fourth quarter of of fiscal year 20 before I address new business trends. For the full year of fiscal 20, our fee revenue was $1.93 billion, which was essentially flat year over year. Our adjusted EBITDA margin was, or adjusted EBITDA, I should say, was $301 million, and the adjusted EBITDA margin was 15.6%. And as Gary indicated, our adjusted fully diluted earnings per share were $2.92. Now, turning to the most recently completed quarter, our fourth quarter, fee revenue was $440.5 million, which was down 7.9% year-over-year, measured at constant currency. In the fourth quarter, fee revenue for executive search was down 10% globally. RPO and pro-search was down 9%. Consulting down 14%, and digital grew 14%, and all of that's at constant currency. Adjusted EBITDA in the fourth quarter was approximately $70 million with a 15.8% adjusted EBITDA margin, and our adjusted fully diluted earnings per share in the quarter were $0.60. Our balance sheet and liquidity remained very strong. At the end of the fourth quarter, cash and marketable securities totaled $863 million, and that's up about $95 million year over year. And then when you pull out amounts reserved for deferred compensation and accrued bonuses, that's what we define as our investable cash. That balance at the end of the fourth quarter was approximately $532 million. That's up about $150 million year over year. At April 30, 2020, we have undrawn capacity of $646 million on our revolver. So we have close to $1.2 billion in liquidity to manage our way through COVID-19 and, as Gary indicated, to invest back into the business through the recovery. Last, the firm had outstanding debt at the end of the fourth quarter of about $400 million. Finally, due to the negative economic impact of COVID-19, we did take swift and decisive actions to downsize our cost base. As previously announced, we took cost actions that were targeted at compensation as well as G&A spend, and we have initially reduced our cost base by about $300 million on a run rate basis. We believe these actions will help us manage the business to maintaining our minimum operating boundary of adjusted EBITDA neutrality throughout the COVID crisis. And in the current environment, maintaining operational flexibility is critical for us and will allow us not only to preserve the franchise, but as I indicated, will allow us to invest into the recovery. Greg, do you want to go through some of the operating segments? Sure. Thanks, Bob. I'm going to start with the digital segment.

Global fee revenue for KF Digital was $69 million in the fourth quarter and up approximately $7 million, or 14% year-over-year, measured at constant currency. The subscription and licensing component of KF Digital's fee revenue in the fourth quarter was approximately $21 million, which was up $6 million year over year and was flat sequentially. Adjusted EBITDA in the fourth quarter for KF Digital was $17 million, with a 24.5% adjusted EBITDA margin. Now shifting to the consulting segment. In the fourth quarter, consulting generated $121 million of fee revenue, which was down approximately 14% year over year at constant currency. In every region, consulting fee revenue in the fourth quarter was negatively impacted by the sudden shift to work-from-home protocols, which limited our consultants' ability to execute and complete advisory assignments at client sites. Adjusted EBITDA for consulting in the fourth quarter was $11.1 million, with an adjusted EBITDA margin of 9.2%. RPO and Professional Search generated a global free revenue of $82 million in the fourth quarter, with both components down approximately 9% year-over-year at constant currency. Adjusted EBITDA for RPO and Professional Search in the fourth quarter was $12.7 million, with an adjusted EBITDA margin of 15.4%. Finally, for executive search, global fee revenue in the fourth quarter of fiscal 20 was approximately $168 million, which compared year-over-year and measured at constant currency was down approximately 10%. At constant currency, North America and EMEA were each down 10% year-over-year, and APAC was down 16%. The total number of dedicated executive search consultants worldwide at the end of the fourth quarter was 556, down nine year-over-year, and down 26 sequentially. Annualized fee revenue production per consultant in the fourth quarter was $1.18 million, and the number of new search assignments open worldwide in the fourth quarter was 1,229, which was down approximately 28% year-over-year. Adjusted EBITDA for executive search in the fourth quarter was approximately $47.5 million, with an adjusted EBITDA margin of 28.3%. Now I'll turn the call back over to Bob to highlight some of our recent monthly business trends.

Great. Thanks, Greg. So globally, year over year, declines in monthly business as we exited fiscal year 20 and entered fiscal year 21 appear to have stabilized, excluding business growth Our global new business measured year-over-year was down approximately 20% in March and 34% in April. Starting our new fiscal year, May was down approximately 32% year-over-year, and June was down 26%. Over the past two years, June has been sequentially better than May, and kind of in the 5% to 7% range. In the current year, we're obviously seeing the same pattern of improvement. And obviously, at this point, we still don't know July's new business yet. With regards to RPO, new business in the fourth quarter was once again strong with 109 million of global awards, which was comprised of 72 million of new clients and 37 million of renewals and extensions. In the near term, the new business pipeline for RPO remains strong. That concludes our prepared remarks. We'd be glad to answer any questions that you have.

Thank you, ladies and gentlemen. If you wish to ask a question, please press 10. You may remove yourself from the queue at any time by pressing 10 again, but if you do have a question, please press 10. Our first question comes from Tim Mulroney with William Blair. Please go ahead.

Good morning. Hey, Tim. Given we're two months through the first quarter, can you just talk about the recent trends that you're seeing in the consulting business, and can you maybe break that down and what you're seeing by geography and the types of consulting services that are holding up maybe better or worse in this pandemic?

Well, on the consulting side, we've clearly seen a uptick in our D and I business. Um, we've, uh, we've, we've took a pretty proactive stance, both in COVID-19 and with respect to social equality and rice. And so we have, you know, definitely seen, uh, you know, quite a bit of activity in, in the marketplace. when you just isolate June new business, you would find that the consulting new business just in the month of June is down about 29%. And if you were to look over the trailing four months, you would find that the consulting business is down about the same, approximately. So I believe that really up to this point, and don't take this the wrong way, but it's been a bit pre-season for companies. I mean, every company in the world is going to have to change how they do business. Different work needs to get done, and work needs to get done differently. And that's essentially the definition of culture, how an organization gets things done. So whether it is looking at their org strategy whether it's looking at roles and responsibilities whether it's how they deal with customers virtually whether it's how they improve sales effectiveness virtually whether it's m a restructuring all of those things play in to corn fairy's platform today which is substantially different than you know 12 13 years ago in the great recession The other thing we've seen is a pretty significant uptick in career transition services. Several years ago, we started a business called KF Advance. And the thinking behind KF Advance was to give professionals a gymnasium to work out, to use our IP, to grow, to learn, to develop, to be motivated, to be inspired. And we've put over 100,000 people through KF Advance. And the thing that we've found, it wasn't the original intent, but the technology platform that we've built is incredibly powerful. And we're using that platform around career transition. So there's been a number of engagements with the unfortunate decisions that companies have had to make and will probably continue to have to make around what their workforce looks like, they want to be very sensitive and they want to treat people the right way. And part of that is shepherding their transition. And so we've definitely seen an uptick and some really marquee wins there. So I feel really good. about where our consulting business is today. Despite what I said about new business down in June, I mean, look, the world shut down. But I feel really good about where that consulting business and you'll see, when we unfortunately had to right size our workforce, we were very purposeful in how we did that. And you'll see that the number of consultants really didn't change much. We had a contingency playbook that we dusted out a year ago, and part of that playbook, we knew what we were going to do. And part of that was driving change within our own organization. And so we were careful about preserving muscle.

Okay. Very helpful perspective. Thank you. One more from me, maybe shifting gears to your digital business. Can you just talk about the recent acquisitions you completed? How is this going integration-wise? How have they performed during the downturn, and how much did they contribute to revenue in the fourth quarter? Thank you.

Well, yeah, thank you, Tim. We've integrated that business, so we don't disclose that separately. I will tell you that it's been incredible. There are, at least in the United States, 15 million salespeople, Not only that, but what we picked up are tremendous learning capabilities around project management and the like. So I could point to a couple wins in career transition where actually that was in part due to the people and the IP that we picked up through the Aspen acquisitions. So as you think about different work needs to get done and how companies are going to have to engage with customers and what that customer experience looks like and what they do around their sales force, I'm very, very bullish on what we can do with that business. And we're also today bundling our services. which I think, you know, that's very unique for a professional services firm. So if we are, for an example, if we are doing a search for a chief revenue officer, we are bundling in diagnostics that we can do at very little cost around their sales force.

Okay, thank you very much.

And our next question comes from George Tong of Goldman Sachs. Please go ahead.

Hi, thanks. Good morning. You provide us helpful details around new business trends in March, April, May, and June. Can you unpack those by executive search, by geography, and perhaps consulting, call that RPO, but just a little bit additional detail there by month would be very helpful. Thank you.

Yeah. Let me, let me, let me kind of step back and then Bob and Greg, if you can kind of fill in, let me first say, let me look at trailing four months. And I would, I would generally say that the way the business has operated in a crisis that we haven't seen in a hundred years, but as we thought about the company and what we were building, we obviously wanted to create something that had real impact for clients. That was number one, to enable people and organizations to exceed their potential. But also part of it was to diversify our platform. So when you look at the trailing four months and you look at global new business, first of all, it's down 15%. When you unpack that, you'll find that RPO new business is actually up 72% over those four months. Digital is up 2%. And the most cyclical on the other end of the curve, which we thought it would be, was professional search. That was down 36%. And let me put an asterisk there that we actually saw, as you would expect, that was the most cyclical going down It was also the most cyclical coming up in June. The executive search was next. It was down 33% and consulting was less cyclical than search at say 27%. So I think that that broad thesis and look, this is four months. I'm not going to sit here and say that's going to last forever, but I do believe that's pretty good evidence. that the strategy that we laid forth about diversifying the company, not only geographically, but by the services we offer, holds water and it holds up. When you look at the last three months, as we talked about, again, June was better than May and May was better than April. When you look at the month of June, just stand alone, the first thing I would say is there was no deterioration in the back half of June versus the first half. So all this crap around negative square roots and all these symbols people throw out, we did not see that. I'm not saying we're not going to see that, but we didn't see that within the month of June if you want to be that myopic. In the month of June, global new business was down 23%. When you start to unpack that by region, you'll find that North America was down 24. I mean, it was down 23. APAC was down 16. APAC went into the crisis earlier, allegedly came out of it sooner. Um, despite all the news that we're seeing today in Beijing. When you look at it by line of business solely on the month of June, you'll find that search was down 33%. Consulting was less cyclical at 29. Uh, digital was actually up, um, a few percentage points and RPO PS was down 17, but you really can't look at that 17 because RPO is very lumpy. And we had some in crud despite this whole pandemic. we've had some incredible wins in the RPO business. So Bob and Greg, do you want to add anything to that?

Yeah, just a couple of points. You're right, Gary. The RPO business and those wins that we had in the fourth quarter, a significant percentage of it came from the Asia Pacific region itself. One was in Singapore and one was in Australia. The other thing I would add is, you know, we've, take a look at the new business activities over the past, you know, four or five months, the one thing that's clear is there's really no discernible patterns that emerge. You know, one month, you know, we could be doing, you know, fairly poorly in new business and then the next month it pops back up again. So it's really choppy, a lot of sawtooth activity, which I think is what you would expect environment as people are trying to deal with the working from home and the current pandemic and so on. But geographically, again, there's not a lot of differentiation amongst the different geographies. So that would be the only other thing I would add, Gary. Okay. Thanks, Bob.

Great. And just to follow up on On EBITDA, your goal of maintaining EBITDA neutrality, can you talk a little bit more about that, over what time frame you hope to achieve that goal, and if that really was a statement around margins or EBITDA dollars?

Well, I would first say we're not providing guidance. That would be my first comment. If you were to tell me when the biology you know i i really do believe this is a triangulation of cash biology and psychology so to the extent that you're fortunate enough to have cash either as a business or individually you've got an incredible amount of freedom corn fairy is blessed that we have that financial freedom biology is going to determine the end point and the thing that's in the middle which is really our business that we offer to clients, is really around psychology. How do you get work done differently? How do you motivate? How do you inspire? How do you develop? How do you pay? That's exactly what Korn Ferry is all about. So I think we are much better positioned today than we were, say, in 2008 and 2009. So to answer your question, I'd first step back and say, if you tell me when the humanitarian crisis ends, I could tell you how these operating boundaries shift. Number two, I think a CEO's charge is around stakeholders. So it is, again, a triangulation of shareholders, employees, and your customers. And I think you've got to walk that balance, and particularly in a time when a lot of people are suffering We have to be very, very cognizant of our own colleagues and their wellbeing. And so we have to balance those constituencies within that stakeholder paradigm. So for this quarter, for the first quarter, the July quarter, we have established a boundary. of EBITDA neutrality. How and if that changes will really depend on the humanitarian crisis. And that is something that I just can't predict. I mean, you see it right now. You see the spike up to 50,000 cases. That's hard to predict. So we're trying to run that balance And we also want to accelerate through the turn. You know, it's much like driving a car. You don't, you know, you brake well ahead of the turn. And that's what we did a year ago with our contingency playbook. What you want to do is step on the gas through the turn. And that's why we've got that ample balance sheet. That's why we took the actions that we took.

And, Gary, I would just add to that, George, our operating boundary is a minimum of EBITDA neutral. So it's not that we're going to operate the business to EBITDA neutral. It's going to be a minimum of EBITDA neutral.

Got it. Very helpful. Thank you.

And our next question comes from Mark McCone with Barrett. Please go ahead.

Good morning and good afternoon, depending on where you are. Gary, I really appreciate the thoughtful comments that you had. Just one clarifying statement. When you say EBITDA neutrality, do you mean break-even, or what exactly does EBITDA neutrality mean?

It means a minimum of EBITDA break-even.

Okay. Okay. And you do have, you know, results through June. I know you're not giving guidance and we're not expecting it, but I'm wondering if there's any way of kind of giving a frame for, like, if, you know, revenue is down by, you know, 29 or 30% on the consulting side, that would typically translate over to blank as it relates to margins. Is there any way of giving some sort of guide rails just with regards to, not necessarily guidance, but just an understanding of like, okay, what does this mean? Because you've done a great job in terms of managing the expenses thus far. And associated with that, can you talk a little bit about some of the restructuring actions and the cost savings that they will drive on an annualized basis going forward.

Okay, let me try a couple. Bob can add, and Mark, if I missed something, just come back in again. Bob, you can comment on the revenue to margin. I'll first start with new business to revenue. So when you look at the organization, if you take the Search businesses. So both executive search and professional search. Those generally, so that's 45% of the company today. Those generally convert to revenue within 90 days. So if you take the trailing four quarters, trailing four months, those search businesses are down, call it 35%. So I think you can reasonably do some mathematics. And I tell you that in June, uh, search, um, executive search was down 33%, although professional professional search was actually a much, much different story. So that's, that's that piece of it. The, um, I would say on both the consulting and digital business, let me just lump it together for a second. What you'll find there is that new business generally converts to revenue within the first 12 months at about two thirds. So about two thirds of the new business in consulting and digital flow to revenue within 12 months. So again, substantially different than search. The balance goes over probably 13 to 35 months. The RPO business, what you would find there is probably less than 50%, but probably more than 25% of new business would get recognized in 12 months. The balance would get recognized over you know, 13 to 35 months. So that's one way to kind of think about the mathematics of new business translating to revenue. Bob, do you want to add anything to Mark's question there?

Yeah. So, Mark, to make sure I understand, you were suggesting or questioning whether incremental dollars of revenue, how that translates to margin?

Right. So specifically, Bob, you know, and Gary, thank you for the clarity with regards to the revenue flow through. Just thinking about the, let's take the most simple case, you know, in terms of executive and professional search where, you know, roughly the new business trends are basically going to convert to revenue over 90 days. So we have a pretty good understanding of where the revenue number is going to be for that. If we're down by 29% or 33%, what would that end up doing to EBITDA margins? Would we stay at that break-even level? Would we be at the 5% level, 10%? How does that How does that translate or how should we think about that? I know it's – and I'm not taking it as guidance. I'm just saying if you're framing something like that where it's relatively clear-cut of, you know, where the revenue goes, how should investors expect the margins to flow?

Yeah, I think that, you know, as you think about the – Rem is going down. There's a couple of things that are complicating, and I'm not trying to skirt the question, but there's a couple of things that are complicated. It depends on which line of business experiences the worst downturn. As you know, searches are profitable at the 24%, 25% EBITDA margin. Digital is even more profitable and so on. So a lot of it's going to depend on what line of business, how the revenues fall. you know, in and of themselves. The other thing that complicates it, too, is, you know, Gary talked a lot about the new business and how it translates to revenue. What we're also seeing, Mark, is the new business, we're seeing a real shift in the mix of our new business, right? So if you look at and you break it out between smaller engagements, you know, say those below $500,000, whether it's in, you know, digital or consulting business, we're generally seeing declines in new business at that level. If you go 500,000 and above, we're actually seeing new business growth year over year. And so you've got not just the overall decline in business, but you have a shift in the mix of the size of the engagements, which makes it even more challenging to step back and say, okay, we're down 29%. this is what's going to happen to our EBITDA margin.

But I guess, Mark, if your question is, hey, if consulting is down, just take the consulting piece of the business, if it is down, you know, 30% or so, would we expect break-even EBITDA? Yeah, we would.

Okay. And what about on the search side, Gary?

Yeah. I would say that that would be positive EBITDA. Okay, great.

And then can you talk a little bit about on the consulting side, how much of the decline in terms of new business, obviously these are unprecedented times and it's really hard to unpack things, but how much of the decline in consulting do you think is due to the fact that we have to work from home? relative to just the financial constraints and the uncertainty that's out there? Is there a sense that you have from that perspective? In other words, in a work-from-home environment for a prolonged period, is that really the constraining factor as opposed to the financial uncertainty?

Yeah, good question. You know, we pivoted hard towards digital. Having said that, when you look at our – let me just take the advisory business together, both consulting and digital. The reality is we had a very big, and we have today, a very big learning business. Assessment and learning is 25% of the company. And when we candidly look in the mirror – a lot of that delivery of learning was classroom. And so that got devastated. And we made a hard push, like we were before. We went to this digital platform. We've incorporated Aspen. But the reality is we weren't where we needed to be in terms of, nor was anybody, you know, delivering things virtually. So to give you some idea how hard we've pivoted, In April and May, we've done more virtual delivery development than we did in the prior 10 months. So we have gone 180 degrees hard on all of our development capabilities, whether that's inclusion, whether it's simulations, the whole thing. We have absolutely gone digitally now. So you're going to see the impact of that, you know, that stoppage essentially of the economy for a couple months. You're definitely going to see that in our first quarter. There's no question about it. And when you look at it, you know, that specific question where it really has hit Korn Ferry, and I think it would hit anybody that's in the that was in the development or training or learning business for the most part, not everybody, but, but that definitely hit us hard because that just stopped. I mean, everything, sales, effectiveness, training, you name it. And so now we are pivoting and we've been pivoting for months now, very, very hard. And so when you look at some of these, you know, new wins, marquee wins we have now, such as, you know, career transition services, all of that's virtual. I mean, it's absolutely all virtual. I think the other thing that's going to be really interesting is our assessment. You know, we've assessed 70 million executives, and we have an assessment for everything. You know, we have a half a billion profiles on people. And so the thing, you know, the thing that's going to be interesting is going forward in a more virtual world for sure over the next several months. You know, when it comes to hiring, you know, the physical interaction, that's not going to be what it was. And I think that people are going to have to rely more on who somebody is and the assessment rather than the personal bias they have when they're actually doing an interview. So that could play really nicely into Corn Fairy's hands.

Great. Gary, can I just squeeze one more in? Just with regards to D&I, organizational structuring, and potentially pivoting sales training to be sales training in a virtual world and how that can be done more effectively, how big are those individual pieces and how would you rank your consulting practices in those areas relative to some of the leaders within the space?

D&I, we're the best. We're the biggest. I have no question, no doubt. It's eight digits. It's a nice-sized business. So we've certainly seen some very good activity there. Our org strategy business is about 10%. That is not as deep as it needs to be. for sure. So that is not at all. When you look at the bulge bracket strategy firms, it doesn't, you know, again, we've got, we've got, you know, a lot of opportunity there ahead of us. We've got to build that. So that's, you know, at least that, that's those two, how I'd rank it. Our assessment and development is world-class, absolutely world-class. No question about it. Our rewards business is, is 10%, and I'm going to say that's world-class as well.

Great. Thank you.

And our next question comes from Mark Reddick with Sedati. Please go ahead.

Hey, hello, everyone.

Hey, Mark. Hey, Mark.

So I wanted to start with if you could update our views on use of cash and maybe some of the opportunities that are there. I wasn't sure if you could maybe address acquisition opportunities that may be presented by the business challenges that are in the environment.

Well, there will be. A year ago when we brought out our contingency playbook, one of the things that we actually took an accelerated effort at was meeting a lot of companies. And we, you know, in terms of the, I think we've done 13 acquisitions over maybe 12 or 13 years. And for most of those, there wasn't a book. Those were relationships we developed. So we went into that pretty hard a year ago. We've already seen a couple of those come our way. We passed on those. So I do believe that's going to be an opportunity for Korn Ferry as this pandemic subsides. I think the, you know, again, the triangulation here is cash biology and psychology. And, you know, cash gives you substantial freedom and substantial freedom to invest and grow depth and capability. So our first... Obviously, I think we've had a pretty balanced approach to how we do capital allocation between dividends, stock buybacks, acquisitions, and our people. Obviously, this pandemic puts a little bit different characteristic. Now, again, we're starting from a position of strength when you look at our balance sheet. So those opportunities will undoubtedly, we're still actively doing the same thing we've always done, which is, you know, meeting companies and operating the business to accelerate through the turn. But I think that, you know, given what we've seen over the last few days, which, you know, I mean, anybody could have predicted three or four weeks ago that this thing is going to come in waves. And that's the reality. And, you know, when this thing started, we thought it would be, you know, 18 to 24 months that it was going to come in waves. And the real endpoint is the biology. It's when there's either a vaccine or a therapeutic answer that's widely available. And that's not happening in the next two or three months. So I think we're going to, you know, we're going to run that right balance of, shareholders, employees, customers. We'll continue that balanced view of capital allocation. And we will have opportunities. There's no question about it.

Okay, great. And then I wondered if you could spend a little time talking about the overall umbrella of the change of culture that your customers are currently embarked on that particular journey. I was wondering if you could share maybe some of the interactions that Korn Ferry has had with them. Do you get the sense that the initial stages of that are now taking place and maybe are they taking place higher up the ladder in the C-suites, if you will, more so than it was before? Just wondering if you could sort of share what that process looks or feels like to you as opposed to those of us looking from the outside looking in.

I think that the first few months, people were playing defense. And, you know, cash was not just king, it was God. So everybody was really, for the most part, there's obviously some exceptions, but I think when you look at it generally, people were playing defense and trying to protect their employees, get them moved to a virtual environment. And so, again, don't take this the wrong way, but that was a bit preseason. I think the regular season will start here. And I think there's going to be advances and there's going to be retreats. But the great companies are going to be those that go on the offense. And that's what great companies do when there's a crisis. That separates great from good. Great companies accelerate through the term. So I think what you're going to see barring some major lockdown is that you know, you're going to have the more waves of this virus. That's for sure. People are going to have to learn with that they're going to have to learn to deal with that risk. Governments are going to be very generous, I think for the most part. And I think companies over a period of time, are going to move to offense. Right now, they still haven't fully. Somehow, I'm not going to say everybody, but people are going to start to move to offense. Whether that is in July, whether that's in October, I can't really say. But there's no doubt that that will happen.

I appreciate the commentary, Nicholas. Thank you.

It appears there are no further questions, Mr. Brunson.

Okay. Well, listen, I want to thank you for listening to the call and I just, I've never been more proud of our company and our colleagues and all the things that we've accomplished in, um, you know, let's face it, you know, an event that hasn't happened in, in, um, a hundred years then also with America. dealing with the issue of race, and I'm proud that Corn Furry has taken the leading voice in those. So thank you very much for your time, and we'll talk to you here in a couple months. Thanks very much. Bye-bye.

Ladies and gentlemen, this conference will be made available for replay starting today at 11 p.m. Pacific through July 9th at midnight. you can access the replay system by dialing 866 207 1041 with an access code of 445 0757 again that dialing number is 866 207 1041 with an access code of 4450757. That does conclude your conference for today. Thank you for your participation and for using AT&T Event Conferencing Service. You may now disconnect.