Korn Ferry (KFY) 2018 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

And welcome to Korn Ferry fourth-quarter fiscal year 2018 conference call.

(Operator Instructions).

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 quarterly report for the quarter ended January 31, 2018 and the Company's soon to be filed annual report for fiscal year 2018.

Also, some of the comments today may reference non-GAAP financial measures such as adjusted fee revenue, constant currency amounts, EBITDA and adjusted EBITDA.

Additional information concerning these measures, including reconciliations to the most directly comparable GAAP financial measure, is contained in the financial presentation and earnings release relating to this call, both of which are posted in the Investor Relations section of the Company's website at www.KornFerry.com.

With that I'll turn the call over to Mr. Burnison.

Please go ahead, Mr. Burnison.

Thanks, Leah, and hello, everyone.

A really great quarter, it's that simple.

The top-line growth was 17%.

We achieved about $475 million in fee revenue.

The fiscal year that just ended here in April was the highest revenue in our Firm's history.

We were up about 13% year-over-year.

And our top-line performance was consistent across all geographies and solutions.

And looking back here over the past few months and particularly the last year, to say I'm proud is an understatement.

We hit revenue, fee revenue of almost $1.8 billion.

That's up about $200 million year-over-year.

We achieved record EBITDA for the fiscal year of about $275 million.

We transformed ourselves from a monoline business to a global organizational consulting firm.

As you know, today almost half our revenue is generated outside of talent acquisition.

We reshaped our workforce, 70% of our colleagues today work outside the United States.

53% are millennials, 14% are baby boomers, and 61% of our colleagues are female.

And one of the things I'm most proud of is that during this last fiscal year we promoted nearly 1,000 of our colleagues internally.

And we also had incredible talent join us from the outside from major consulting firms and clearly they are having an impact on our business and with our clients.

So, we've certainly come a long way on our journey but we are just at the beginning.

And if I just think about where the organization is headed, it first starts with purpose and that should start for any company, not the what or the how or the when but really the why.

And the why for us is we help people and organizations exceed their potential.

And for any leader, for any CEO, the challenge is harmonizing their strategy with their talent and that's absolutely what we do.

That's what today's Korn Ferry is all about and that's what we are building, a firm that indeed can synchronize our clients' strategy with their talent to help them drive superior performance and that need, that desire to create that melody is -- today it's more important than ever.

So to seize this opportunity, as I've talked about on past earnings calls, we have to continue to move our Company towards an industry and solution orientation, realizing the collective power of Korn Ferry the enterprise rather than individual lines of business or distinct parts.

So today we're taking the next logical step in our transformation, officially moving to one brand, Korn Ferry.

And so, as a result we will be sunsetting our legacy brands, achieving a more unified branding approach to the marketplace as Korn Ferry, making the whole of Korn Ferry synonymous with enabling people and organizations to exceed their potential.

In essence making the whole greater than the sum of the parts.

We are going to begin this sunsetting process later this month and it will be completed over the next 18 months.

And I'm excited about this effort; I'm excited about this natural evolution in branding and about the future.

And I think this next step here brings us closer to our vision, which is to be the preeminent global organizational consultancy.

And so, for us we are never more powerful than when we come together as one firm.

Again, as you know, a firm that helps companies design their organization, how to motivate people, how to compensate people, how to develop people, how to get people to wake up at 4:30 without the alarm clock, and to find out the talent that fits the strategy of a particular company.

So, today's Korn Ferry, we transform individuals, teams, entire organizations and we do change people's lives.

And so, I've got a big push that we really -- inside out that we focus on interdependence.

That we continue that journey that we started several quarters ago making the whole greater than the sum of the parts.

And at the end of the day for any CEO it's really not about technology or strategy or structure or process, it's people, it's all about people anchored in a common purpose.

And the reality is we are more than -- we are more than a talent acquisition company.

We are more than a leadership development company.

We are more than compensation and reward advisors.

We are more than a licensor of data and IP.

We are more than organizational strategy advisors.

We are Korn Ferry and collectively we purposefully enable people and organizations to exceed their potential for clients, for the marketplace.

We know what work is, we know how to organize it.

We know how to find the best people to do it, how to reward them for it.

We know how people develop, we know how to gauge them and that's the firm we are creating and I'm excited about the future.

So I'm joined here, as usual, with Bob and Gregg and I will turn it over to you.

Great, thanks, Gary, and good morning, everybody.

I share Gary's enthusiasm for the quarter that we just delivered as well as the full year.

And before I make comments we want to say thanks to our 7,500 colleagues for all the energy that they've put into creating our fiscal 2018.

So let me start with a few key highlights here.

First, our results in the fourth quarter and full fiscal year clearly demonstrate the potential of our Firm.

Our global fee revenue accelerated for the fourth consecutive quarter, reaching a record high of $475 million, which was up 17% year-over-year in actual rates and 13% in constant currency.

Growth once again was broad-based.

Each of our major operating segments achieved record high fee revenue and double-digit growth.

Growth continued to be the strongest in our talent acquisition businesses, both Executive Search and Futurestep, which grew year-over-year in the fourth quarter by approximately 18% and 31% respectively.

We also saw strong revenue growth for the Hay Group.

Revenue reached $208 million, year-over-year growth rate of 12%, the second quarter in a row at that level.

And as Gary indicated, for all of FY18 our fee revenue was $1.767 billion, which was up about 13% year-over-year and 10% in constant currency.

Second in the fourth quarter, one of the things that we're very proud of, the growth in our earnings continued to outpace our revenue growth.

Adjusted EBITDA in the fourth quarter grew to $75 million.

That's an improvement of $14 million or 24% year-over-year, while our adjusted EBITDA margin improved 90 basis points year-over-year to 15.7%.

All of our operating segments achieved record high adjusted EBITDA in the fourth quarter as well as the full fiscal year.

And for all of fiscal 2018 our consolidated adjusted EBITDA was approximately $275 million, which was up about $39 million or 16% year-over-year and we had an adjusted EBITDA margin of 15.5%.

Now let me turn to some new business trends, which in the fourth quarter were also at record highs for each of our business segments.

First, Executive Search, new business continued to accelerate in the fourth quarter.

Globally our Executive Search new business in the fourth quarter was approximately $192 million.

It's up 11% year-over-year driven by strength in North America, Europe and Asia Pac.

Similarly new business growth in the fourth quarter for the Hay Group was also strong, came in at $226 million.

It's up about 12% year-over-year and up double digits for the third consecutive quarter.

And finally Futurestep was awarded a record $152 million of new business in the fourth quarter and that includes about $120 million of long-term RPO contracts.

At the end of the fourth quarter our total cash and marketable securities were $658 million.

That's up approximately $127 million compared to the fourth quarter of fiscal 2017.

And then excluding amounts reserved for our deferred comp arrangements in our accrued bonuses, our investable cash balance at the end of the fourth quarter was about $312 million, and that's up about $67 million year-over-year.

And our debt at the end of the year, the outstanding debt, was $236 million.

Finally our adjusted diluted -- our fully diluted earnings per share were $0.80 in the fourth quarter of fiscal 2018.

That's up $0.18 or 29% compared to the fourth quarter of fiscal 2017.

On a GAAP basis, which includes the ongoing amortization of retention bonuses and adjustments related to the new US tax legislation, our fully diluted earnings per share for the fourth quarter was $0.73.

For the full fiscal year our adjusted fully diluted earnings per share were $2.72.

That's up about $0.48 or 21% compared to fiscal 2017.

And on a GAAP basis, again, which includes the impact of the net income of both the amortization of retention bonuses as well as the change in US tax law, fully diluted earnings per share were $2.35.

Let me turn it over to Gregg to review the operating segments in a little bit more detail.

Okay, thanks, Bob.

Growth for our Executive Search segment continued a strong pace in the fourth quarter as global fee revenue reached $190.7 million, a new all-time high.

Compared year-over-year and measured at actual exchange rates, global Executive Search fee revenue grew $28.4 million or 17.5% in the fourth quarter and 14% measured at constant currency.

Growth was broad-based with each of our geographic regions up double digits in the fourth quarter.

North America was up 15%, Europe was up 22%, Asia-Pacific was up 23% and Latin America was up 11%.

By Executive Search specialty practice, growth in the fourth quarter was mixed.

Compared to the fourth quarter a year ago our education practice grew 28%, our financial services practice grew 17%, our industrial practice grew 5%, our consumer goods practice was up 2% while our life sciences and healthcare and technology practices were both flat.

The total number of dedicated executive recruitment consultants worldwide at the end of the fourth quarter was 541, up 24 year-over-year and up 5 sequentially.

Annualized fee revenue production per consultant in the fourth quarter was $1.42 million and the number of new search assignments open worldwide in the fourth quarter was 1,590, which was up approximately 4% year-over-year.

Adjusted EBITDA for Executive Search in the fourth quarter was $48.6 million, up $14.4 million or 42% year-over-year.

Adjusted EBITDA for Executive Search was positively impacted by a decrease in the fourth quarter in the value of the liability associated with the Firm's deferred compensation plan.

As in the past, quarterly market driven gains or losses in the value of the liability associated with the Firm's deferred compensation plan are recorded as increases or decreases in compensation expense and primarily affect North America Executive Search.

This does not benefit the Company's consolidated EBITDA as the plan is funded and the assets sit on the [quoted] balance sheet and therefore an offsetting gain or loss is recorded in the corporate segment.

The consolidated adjusted EBITDA margin for Executive Search in the fourth quarter of fiscal 2018 was 25.5% compared to 21.1% in the fourth quarter of fiscal 2017.

For the full year of fiscal 2018 Executive Search fee revenue grew to $709 million, which was up year-over-year by $91 million or 15% at actual exchange rate and 13% constant currency.

Additionally adjusted EBITDA for the Executive Search segment for fiscal 2018 was $158.9 million, which was up $21.5 million or 15.7% year-over-year.

The adjusted EBITDA margin for fiscal 2018 for Executive Search was 22.4% compared to 22.2% for fiscal 2017.

Now turning to the Hay Group where fee revenue measured year-over-year accelerated for the fourth consecutive quarter.

In the fourth quarter Hay Group achieved fee revenue of $207.5 million, which was up 12.1% year-over-year and 7% measured at constant currency.

Growth was driven by strength in both the Europe and Asia-Pacific regions, which were up double digits, and emerging growth in North America, which was up 3%.

As previously mentioned, new business awards for the Hay Group in the fourth quarter accelerated and were up approximately 12% measured year-over-year.

Higher revenue drove improvement in earnings and profitability for the Hay Group.

In the fourth quarter adjusted EBITDA was $38.7 million, an improvement of $5.7 million or nearly 17% year-over-year with an adjusted EBITDA margin of 18.6%, which was up 80 basis points year-over-year.

For the full year fiscal 2018, Hay Group achieved $785 million of global fee revenue, which was up year-over-year by $57 million or 8% at actual exchange rates and 6% at constant currency.

Adjusted EBITDA for the Hay Group for fiscal 2018 was $142 million, which was up $13.8 million or 10.8% year-over-year.

The adjusted EBITDA margin in fiscal 2018 for the Hay Group was 18.1% compared to 17.6% for fiscal 2017.

Finally, turning to Futurestep where growth continued to accelerate in the fourth quarter, in the fourth quarter Futurestep generated $77.1 million of fee revenue, which was up 31% year-over-year at actual rate and up nearly 27% at constant currency.

All geographic regions grew at double-digit pace in the fourth quarter and, as previously mentioned, in the fourth quarter Futurestep was awarded over $152 million of new business globally.

Futurestep's earnings also improved sharply in the fourth quarter with EBITDA of $12.5 million and an EBITDA margin of 16.3%, which were both up year-over-year.

For the full year of fiscal 2018 Futurestep's fee revenue grew to $273 million, which was up $49.5 million or 22% at actual exchange rates and 20% at constant currency.

Adjusted EBITDA for Futurestep in fiscal 2018 was $42.6 million, a year-over-year improvement of $9.7 million or nearly 30%.

Futurestep's adjusted EBITDA margin for fiscal 2018 was 15.6% compared to 14.7% for fiscal 2017.

Now I'll turn the call back over to Bob to discuss our outlook for the first quarter fiscal 2019.

Great, thanks, Gregg.

Before I get into any guidance on the FY19 first quarter I'm going to provide a little bit more color on the rebranding that Gary spoke about.

As he mentioned, we will be harmonizing our operations under one single master brand, Korn Ferry.

We have enough proof points at this point to conclude that the time is right for an integrated One Korn Ferry brand.

I'm going to give you a couple examples.

Our revenue growth for our marquee accounts and the level of referred revenues between lines of business are both growing at twice the rate of growth of the revenue growth of our Company as a whole.

Revenues from clients that we're serving with multiple lines of business are 4 to 5 times greater per client than those of clients using only one line of service.

And when we step back and look at those activities the common theme in all those instances is that we go to market and service all those clients with fully integrated teams who deliver the full spectrum of Korn Ferry resources and deliver tangible results with real business outcomes.

So with those proof points in mind we will be discontinuing the use of our sub brands including both Hay Group and Futurestep.

So starting in the first quarter of fiscal 2019 the Hay Group segment will be renamed Korn Ferry Advisory and the Futurestep segment will be renamed Korn Ferry RPO and Professional Search.

This change will impact the names of our segments but will not impact our segment financial reporting.

The financial makeup and leadership of each of those segments will remain as is, ensuring that the ongoing quarterly segment results are consistent in composition and comparable with historic segment results.

And obviously the Executive Search segment will remain unchanged as we go forward as well.

Now in connection with the discontinuance of our sub brands we will be taking a non-cash impairment charge in the first quarter of FY19 of approximately $106 million and that relates to the trade names that were established for Hay Group and Lominger, and those were established at the time the companies were acquired as part of our original purchase accounting.

Also going forward there will be operating costs associated with the rebranding, but we have planned carefully so that we will simply absorb them as part of normal operations and do not expect them to be material in any one future quarter or to have any impact on our margins going forward.

Now turning to FY19 first-quarter guidance, new business activity exiting fiscal 2018 and entering fiscal 2019 has been strong for all of our business segments.

Globally for Executive Search new business awards in the months of March and April were very strong and May new business was up approximately 24% year-over-year, and month to date in June we see that strength continuing.

For the Hay Group, which will be renamed Korn Ferry Advisory, first quarter is typically down sequentially from the fourth quarter, but we do expect the improvement in new business trends that we have experienced in recent months to continue.

Fourth-quarter new business for Hay Group increased 13% year-over-year and May new business kept pace with 12% year-over-year growth.

With regards to Futurestep, which will be renamed Korn Ferry RPO and Professional Search, both business under contract and the pipeline of potential new business opportunities remain strong and we expect it will drive continued growth in the first quarter.

Now considering all these factors and assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady, we expect our consolidated fee revenue in the first quarter of fiscal 2019 to range from $450 million to $750 million, and we expect our consolidated adjusted diluted earnings per share to range from $0.67 to $0.75.

Finally, considering the non-cash impairment charge of approximately $106 million that I previously discussed, as well as the ongoing quarterly amortization of approximately $2.3 million for the retention bonuses related to the Hay Group acquisition, we estimate that fiscal 2019 first-quarter fully diluted loss per share measured by US GAAP will likely be in the range of $0.74 to $0.66.

That concludes our prepared remarks.

We would be glad to answer any questions you may have.

(Operator Instructions).

Tim McHugh, William Blair.

First I was just going to ask on the branding.

Can you talk about I guess -- I don't know what the right word is -- [risk], but I guess how do you plan to mitigate any concerns?

I can imagine there'd be some questions from Executive Search about the brand in terms of staying out market versus how some of the other brands are used to it.

Can you just talk about the puts and takes as you go through this process of rebranding?

Yes, sure, Tim.

Look, I hope that this has been pretty consistent over the quarters and years.

We want to move the Company towards being in the business outcome business.

So we have to move the organization to being in the solutions business rather than the point-of-sale and vitamin business.

And so, that's been an effort that's been underway for a long time.

I think secondly, if you were a buyer of an organizational consulting firms services, you would buy based on industry knowledge whether you believe they can solve your problem, whether you trust them and whether they have the scale to be able to meet you where you are around the world.

Third is that we are continuing to move this organization to really meet the challenge that any leader or CEO has, which is synchronizing their talent and their strategy.

So, this is something that has been part of our playbook in terms of how we've been moving the Firm for quite some time.

The reality is we have acquired and made investments into companies over a long period of time.

We have gotten great people and we've gotten great IP and data and I think we've shown that we can do something with that.

But the reality is that as we have embarked on this journey there is one brand that rises above the rest and that is Korn Ferry.

And I believe that we have a much more connected offering, a real value proposition.

And my fear has been that if we continue with Executive Search, Futurestep, Hay Group that it's a little bit like audit, tax and consulting.

And the truth is there's much more connectivity between the solutions and services that we offer and certainly Bob's -- some of his data points I think absolutely they certainly prove that.

So I would say the reality is, even though we've used Search and Futurestep and Hay Group and many other brands that we've bought, the drive and the push, the go-to-market strategy, all of that has been behind one brand.

And the other thing that I would say is that the services that we're offering I believe are all very high-end and high impact.

And there may be, quote, different buyers within an organization, but they all ultimately touch what makes businesses successful.

So that would be the kind of 38,000 foot view.

Again, we are going to approach this like we've done everything, in a very purposeful manner.

So we are going to do this carefully, we're going to do this over the next 18 months.

We have a plan, we have it developed.

And so, it will be done in a very orderly manner both with clients and as well as within the organization.

And I think your point on that search comment, we've obviously done an incredible amount of data collection and we are 200% confident in the direction that we've outlined here.

Okay, great.

That's helpful.

Does that impact how you think about M&A?

I suppose you'd be likely -- anything you would acquire going forward would be something you'd want to migrate to this brand as well.

It really depends.

The reality is that when you acquire something you are really acquiring a culture, people, capability, IP and it really depends.

If it's an area that say we don't have an expertise in at all, we are not known for, I think keeping the brand longer is -- certainly that makes sense.

To the extent that you are in that business already, then I think that you would probably move to consolidate it quicker.

So, we tend to look at the business, we are going to increasingly look at it along solution lines.

We have got five solutions and so we will certainly give color to you along those solution lines as well.

Okay, last one just on what I guess used to be called the Hay Group.

The product side -- are you seeing an improvement there?

I think the perception I would've had the last 6 to 12 months before this was that it was more led by the consultancy side, the improvement, but it looks like product is helping this quarter.

So I guess what are you seeing on that side of the business?

Yes, I would still caution it's early days.

And as I've talked about, we've got a big opportunity there and there's quite a bit of investment going on in that part of the business.

But yes, the product business was up 11% and the advisory business was up 13%.

So good news on both fronts.

George Tong, Goldman Sachs.

Consultant headcount growth in Exec Search was 5% for the full year.

This is a modest step down from 6% headcount growth in fiscal 2017.

Can you talk about what your hiring plans are for fiscal 2019 and, separately, how you see consultant productivity trending in Exec Search?

We don't guide out more than a quarter.

We are always in the market looking for talent, we're always trying to promote.

Like I said, one of the things I'm most proud of is that we promoted 1,000 colleagues over the course of this past fiscal year.

In the, quote, Executive Search segment the average revenue per partner was $1.4 million.

We had about 541 consultants.

We in the first quarter will promote quite a few colleagues, to say the least, that I'm happy about.

And we're always in the market for talent.

We have to continue, like any CEO in any industry.

That's the name of the game, strategy and talent combine to drive performance.

So we are going to do that like we've always done.

Got it.

That's helpful.

The Hay Group revenue growth meaningfully rebounded this year in fiscal 2018.

Can you talk about your longer-term growth targets for the Hay Group segment and what initiatives you have to achieve these targets from a product and go-to-market perspective?

Well, I've said for a long time that I thought that that business could at least generate 10% growth.

And finally over a couple quarters we strung together some wins here that demonstrate that.

So that's what I've said publicly in terms of our commitment and we've now met with that for two quarters.

I would say that, again, when you look at our Company I would point out there's basically five solutions.

Half the Company is essentially anchored around organizational strategy, assessment and succession, leadership development and rewards.

Those would be how half and the other half is talent acquisition.

And so, it's really not so much a strategy just for Hay Group.

I really believe that the strategy is enterprise wide.

And this is not an audit, tax and consulting business because the reality is the design of the organization and the people that you get to fill that team are absolutely linked.

So in terms of growth path in the future, we believe, number one, that we'll continue to drive an integrated go-to-market strategy.

As you know, we have a real focus on top down what we call marquee accounts, multimillion dollar clients that are loyal where we have real impact, we change the destination of those companies.

That is one pathway for us.

The second pathway is the products business.

Today it's about -- annualized run rate is kind of $240 million, $250 million.

That has the ability to change thousands and thousands of people's lives through our IP.

It's a bit of a Trojan horse.

It gets in there, it's very sticky, it's year after year.

That is the second strategic pathway for us.

The third is this solution orientation.

So specifically building our capability around organizational strategy, around assessment and succession, around leadership development and rewards and benefits.

The next would be M&A.

That is a growth pathway that we have executed on and will continue to be a part of the playbook.

So, those are our strategic pathways.

I think we've been pretty consistent in how we've described those and hopefully we've executed on those.

Very helpful, thank you.

Tobey Sommer, SunTrust.

This is Juan Kim on for Tobey.

Thank you for taking my questions.

First off, could you talk about the underlying drivers of growth in Asia-Pacific and Europe and whether those regions will continue to lead growth ahead compared to Latin America and North America?

Well, Juan, that's a big question.

I'm enormously proud; I'm sitting in Frankfurt, Germany, we are sitting in Frankfurt, Germany, and one of the things I'm most proud of absolutely is our business in EMEA, our business -- and also our business in Asia.

The reality today is 70% of our colleagues are outside the United States.

I think that this last growth, clearly it helps to have favorable tailwinds, no question about it.

But when you look at the last investment we made in Hay Group, the reality was 80% of their business was outside the United States.

And I think that we've delivered on that promise that we can take tremendous IP, great people, combined with access and have this real impact.

And I really believe that that's, probably more than anything, certainly helped to drive the growth in EMEA and Asia.

And this last investment we made that's now I guess a couple years old, the United States was actually undersized relative to that organization that we invested in.

Got it, thank you.

And on foreign currency, has the impact of fluctuating exchange rates become maybe more challenging to manage?

And could there be a strategy in dealing with the volatility on that front?

I would say it's not more challenging.

The past couple years things have been pretty volatile.

When you look at our consolidated reported results, by the time you look at the revenues and the expenses, currencies generally don't have a major impact on us.

It kind of nets out.

Where we have the bigger issue is on our -- we have a lot of intercompany transactions and activity and we have a pretty robust program in place.

We enter into foreign contracts to manage our exposures.

And I think we've done a pretty good job when you look at the size of the Company balances to keep our gains and losses down to a very minimal amount each year.

So I don't see any real change.

I think it's become the norm for us over the past couple years.

That's helpful.

Thank you very much.

Mark Marcon, R.W. Baird.

First of all congratulations.

This has been a multi-year journey and it's great to see it paying off.

I'm wondering just with regards to your overall client base, what percentage of the clients just use one solution at this point?

So, we've got thousands of clients.

I will tell you, so 60% of our revenue comes from clients that use at least two of our lines of business.

However, the percentage of actual by number that that represents is about 15% or 20%.

So in other words, there's another 80% or thousands of clients that only buy one thing from us.

And Mark, as we've been thinking about the whole brand transformation -- I mean, that's the part that really gets exciting when you think about the opportunity to convert those two away from monoline to multiple lines of business, and you start looking at some of the statistics that we have for those clients where we serve them as one Korn Ferry, that's where the real opportunity is.

How will you -- over the next 18 months how will you actually communicate that brand change?

For the clients that perhaps may have used just Hay only or Futurestep has really developed a real reputation within RPO and people are used to seeing that name both in trade rags as well as -- in terms of their experience, how is that going to get communicated?

We are going to do that literally very, very carefully.

The reality is that over the past -- we've embarked on this for a while where Korn Ferry was linked to everything.

So, it was called Korn Ferry Futurestep and I guarantee you the first words out of our people's mouths was Korn Ferry.

So -- and Korn Ferry Hay Group.

So that's been done for a long period of time, so we've already got that track record.

So clearly there is going to be an outside in effort that we have planned out.

We are going to do this on a country-by-country basis.

It will go over the next call it 18 months.

We've got a logical progression in terms of how we've mapped this out strategically.

But honestly, like with any company, there is the outside in, but the bigger is inside out.

And we've got a whole host of activities anchored towards that as well.

Great.

And then with regards to the productivity levels within Futurestep -- I mean within Executive Search, how does that make you think about -- I mean we are hitting new highs in terms of productivity.

Can you talk a little bit about how you're thinking about what the potential is there?

The average was about $1.4 million globally.

In the United States it was substantially higher than that.

I think the one thing that is playing out is that the platform, if you will, that we have is pretty attractive.

And intellectually our consultants can differentiate themselves, but also the impact they have and -- their compensation can also increase.

So when I think about if you just work to be myopic and look at Executive Search revenue, quote, per partner, a very old and historic way of looking at it.

You could see yourself towards 10%, 15%, 20% kind of capacity or gains in this kind of environment that we're sitting at here today.

The wildcard is delivering the entire enterprise and to the extent that we are successful at that, that calculus changes significantly.

So, an example could be a big RPO contract that we just signed of $60 million actually came from, quote, if you look at it this way, a Search person.

Although actually it was driven by an integrated go-to-market strategy.

It was one of our marquee accounts.

But then the kind of revenue per partner in the historic way of looking at things is obviously tilted quite substantially.

One of the things that we've also looked at is the impact of the platform in terms of partner retention and so on.

And one of the things I was taking a look at is if you go back over the past five years, because we were obviously thinking about the same issue you just raised, you look at North America and Executive Search partner and we look at it more now along the lines of business origination.

And business origination over the past five years has growing on average from 2.1 million to 2.6 million per partner, almost 25% growth.

And again, that really is attributable to the platform and what they have to take the market with their clients as Gary said.

I imagine that's fairly uneven in terms of there's probably a top quintile that's probably driving that in terms of really buying in or is it becoming more widespread?

I think it's becoming more widespread quite honestly.

And the thing that makes it a little bit more challenging is I went back over 5 years, if you go back 2.5 years ago we didn't -- the Hay Group didn't exist within Korn Ferry.

And so, what they have to go to market with today obviously is a much more robust set of tools and solutions for clients.

So, I think over time I fully expect to see that number continue to grow now that we've got the Hay Group in place, as Gary went through all of our solutions are lined up, they start to mature a bit more, people get more comfortable with it, I fully expect that business origination number to grow per partner.

Great.

And then just a couple of quick numbers questions.

First of all, Hay Group, how much did it grow in the US?

In the fourth quarter it was about 3%.

Okay, are you seeing an increase in terms of new business opportunities in the US?

Yes, the new business -- I just think we are undersized in the US, just to be candid.

There's just no doubt about that.

The new business has been up about 10% or so over the last several months.

One of the issues is we're -- one of the solution areas is leadership development.

So that for us today is probably 11% of the Company, something I want to say --.

11% to 12%.

Yes, something like that --.

Both with the registered Futurestep as well as Hay, I mean the margins are up.

How should we think about margin targets for both Hay and Futurestep given the progress?

Yes, I think for the Hay Group we've talked about margins.

I think it's in the 16% to 19% range long-term.

Where I sit today, obviously we're towards the high end of that range.

I think we can continue to drive the products business successfully.

I would expect that to be -- continue to be at the high end or even go through the high-end of the range that I talked about.

On the Futurestep side, we've always talked about sort of 13% to 15%, 13% to 16%.

I think one of the things that Gregg and I have been talking about is potentially taking that range and shifting it up a little bit.

I think it's probably long-term more in the 14% to 17% range.

Looks like you are making good progress there.

Congrats to all.

Marc Riddick, Sidoti.

Good morning.

Just wanted to follow up with you.

You really covered a lot of everything else that I had on the plate.

But one of the things I did want to touch on is where you are as far as leadership positions.

Are there any holes that you think you need to get filled throughout the world that you think are kind of key that we should be focusing on?

Thanks.

Leadership positions internally for the Company?

Correct, yes.

We've certainly taken our own medicine.

And I've spent literally -- with our CHRO, we spent weeks over the past several months looking at what we can do to grow from within.

We've identified the top 200 or so in the Company, we've done various things.

We are now on campuses recruiting.

We've got our first class starting this summer.

They are starting in Dallas.

We put them through training for 2 months and we send them to solution areas and cities.

We are at service academies recruiting.

We've obviously got a focus on diversity and inclusion.

We've made a number of promotions, probably 12 in the last 12 weeks or so.

So we've been doing an awful lot ensuring that we have a deep bench.

And so, we are going to continue to do that.

The most recent is we've made a change here in EMEA where our individual who was leading that is now going to assume a Chair role and real focus on building our Board presence on the continent.

So I think we spend a lot of time in this area and we've actually taken some action there.

Okay great.

Thank you very much.

Mark Marcon, R.W. Baird.

Just one more.

Gary, you've always been very sober about the economic outlook.

How would you assess, on a global basis, what you're seeing in terms of confidence among your clients?

Confidence is -- certainly confidence is pretty high for sure.

Now obviously there are clouds out there.

Italy is a cloud, Brexit is a cloud, there's geopolitical risk.

Those are obviously -- it's hard the handicap any of those.

And look, this thing has been going on for 10 years, but I would just tell you that there is a lot of confidence for sure in terms of CEOs and companies that we are doing business with.

Great, thank you.

And there are no further questions.

I will turn the call back to you, Mr. Burnison.

Okay, well, listen, I thank you all for joining us.

Very, very pleased to say the least with the past, but the future is more promising.

And thank you to our shareholders, thank you to our Board and to our colleagues.

And we look forward to speaking to you again.

Thank you.

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