Korn Ferry (KFY) 2019 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Korn Ferry Fourth Quarter Fiscal Year 2019 Conference Call.

(Operator Instructions) As a reminder, this conference call is being recorded for replay purposes.

We've also made available in the Investor Relations section of our website at kornferry.com a copy of the financial presentation that we'll be reviewing with you today.

Before I turn the call over to our host, Mr. Gary Burnison, let me first read a cautionary statement to investors.

Certain statements made on 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, 2019, and the company's soon-to-be-filed annual report for fiscal year 2019.

Also, some of the comments today may reference such non-GAAP financial measures such as 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 kornferry.com.

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

Please go ahead, Mr. Burnison.

Okay.

Thank you, everybody.

Thanks for joining us.

On April 30, we finished another very good year.

We hit new milestones.

Top line was up 12%, constant currency 9%, actual adjusted EBITDA margin of 16%.

We continue to grow our marquee account program.

That now represents 20% of the portfolio.

We returned capital to shareholders.

And most importantly, we maintained our leading industry position in search.

RPO and Professional Search grew double digits for the fifth consecutive year.

I mean that's pretty amazing, 5 consecutive years double digit.

And Advisory grew at 8% constant currency.

We had a very good fourth quarter.

RPO was up 25%.

Constant currency advisory was up 5%.

Overall as a company, we were up 8%.

Top line was up 8% constant currency.

Profitability was strong; EPS, $0.88; and adjusted EBITDA margin of 16.7%.

And as I think about Korn Ferry today, I'm excited about what the future holds.

I think we're really just at the beginning.

But I think we are the only organizational consultancy that helps companies look at talent and strategy together.

We help companies make sure they have the right people in the right places, providing them the right rewards.

And we bring their strategies to life by redesigning their org structures, helping motivate, inspire people, helping them hire the best and hang on to the best.

And today, the reality is we're more than: We're more than talent acquisition, we're more than leadership development, we're more than organizational strategy advisers.

We purposefully enable people in organizations to exceed their potential.

And the firm is substantially different today.

This is not a hyper-cyclical binge and bust firm.

We're now a company for all seasons, focused on the long game with our clients.

Whether that's M&A or going global or some other transformative play, we can help organizations through our 5 integrated solutions.

First, organizational strategy, that is about 10% of the company.

That was the best grower in our Advisory business in the quarter.

It was up about 7% or 8% constant currency.

Assessment and succession is our second solution area.

That represents about 13% of our revenue.

We've assessed, believe it or not, almost 70 million people in our history.

Third is leadership development.

That's about 9% of our company.

Every year, we develop 1.2 million executives around the world.

For the year, the leadership development business was up about 13% constant currency.

The fourth piece is compensation and rewards.

We have comp data on 25 million people around the world, 20,000 companies.

And our rewards businesses is about 10% of Korn Ferry.

And finally is our flagship talent acquisition offerings, where we put somebody in a job every 3 minutes.

Going forward, our strategy remains anchored on our 5 strategic pillars.

Number one is our go-to-market strategy.

And there it starts with our Marquee Accounts and now what we've added is regional accounts.

These are companies where we have greater access and organizational coverage and a strong opportunity for impact.

As I said, the marquee account program represented about 20% of the company in this last fiscal year.

And the growth rate was actually not quite twice, but about 70%, I mean, 1.7x of the rest of the portfolio.

And as I indicated, we're expanding this now to a couple of hundred more regional accounts that I'm excited about.

Second is IP and innovation.

What we do with our -- with the IP that we've developed over the years.

KF Advance is one of those, where we now have 70,000 members.

I think we could be the world's gymnasium for people's careers.

Third, we have to continue to extend our brand.

We have to make the brand more elastic.

Yesterday, we announced a partnership with the PGA Tour.

We're now the umbrella sponsor of the Korn Ferry Tour, which develops and advances the next generation of golfers and it's the primary pathway to getting a PGA Tour card.

And that's what Korn Ferry is all about.

And if I think about our purpose about enabling people and organizations to exceed your potential, it may sound strange, exceeding your potential, but you don't know your potential until you're -- an opportunity, until you're given an abundance of opportunity.

And that applies whether you're coming out of college or in the boardroom.

That's what this company is all about, and that's what I'm so excited about the Korn Ferry Tour, because it represents promotion, it represents advancement.

And so we plan on using this, not just as a sponsorship of a sporting event, but we're going to use it to actually tell our story about who we really are and our purpose about providing opportunity for people, for helping people be more than.

Fourth is the -- has been a pillar of our strategy, M&A.

We continue to look at ways that we can be the sole consultancy that's focused on talent and strategy together.

Fifth is our own people and our colleagues.

We have to continue to develop talent.

64% of our company today is millennial.

63% are female.

Almost 70% are outside the United States.

We're rolling out a brand new global mentoring program that I'm passionate about, but we have to continue to keep that top of mind.

So when we -- we've come a way -- come a long way on our journey, but I think there is a significant opportunity ahead.

So with that, I'm joined here with Bob Rozek and Gregg Kvochak.

And I guess, I'll turn it over to you, Bob, first.

Great.

Thanks, Gary, and good afternoon, everyone.

Results for the fourth quarter and the full fiscal year continue to demonstrate the power of our business model and the growing impact our integrated solutions have on driving critical business outcomes for our clients even in challenging operating environments.

The global geopolitical and economic uncertainty continues to escalate.

Demand for our leading organizational advisory solutions has remained steady, and our financial results, as Gary just went through, continue to improve.

For the full year of FY '19, our financial results reached company and industry highs with record levels of revenue, earnings and profitability.

Fee revenue grew to $1.926 billion, which was up 12% year-over-year measured at constant currency.

Adjusted EBITDA was $311 million, which was up $33 million or 12% year-over-year.

And our full year adjusted EBITDA margin grew to 16.1%.

And finally, in FY '19, our adjusted fully diluted earnings per share grew $0.60 or 22% year-over-year to a record $3.31.

Now turning to our most recently completed quarter.

Fee revenue in the fourth quarter grew to $491 million, which was up nearly 8% measured at constant currency.

As in recent quarters, growth in the fourth quarter was broad-based, with each of our operating segments improving.

Exec Search grew 3%.

Advisory grew 5%.

And RPO and Pro Search grew 25% year-over-year, all measured at constant currency.

Additionally, in the fourth quarter, earnings growth continued to be strong.

Adjusted EBITDA in the fourth quarter grew to $82.2 million, which is a year-over-year improvement of $6.6 million or 9%, while our adjusted EBITDA margin improved 80 basis points year-over-year to 16.7%.

Now turning to new business trends.

Globally, Executive Search new business in the fourth quarter was approximately $200 million, and that was up 4% year-over-year, driven by growth in North America, Europe and Asia-Pac.

New business in the fourth quarter for Advisory was $219 million, up approximately 2% measured at constant currency.

And finally, in the fourth quarter, RPO and Professional Search achieved another strong quarter of new business with total awards of $84 million, which include about $50 million of long-term recruitment outsource contracts.

The $50 million of RPO awards consist of about $6 million in what we would call expansions and renewals and those are with existing clients and approximately $44 million of new client contracts.

At the end of the fourth quarter, total cash and marketable securities were $767 million, up approximately $109 million compared to the fourth quarter of fiscal '18.

Excluding amounts reserved for deferred comp and accrued bonuses, our investable cash balance at the end of the fourth quarter was approximately $382 million, and that's up about $70 million year-over-year.

We ended the year with outstanding debt of about $223 million.

And finally, adjusted diluted earnings per share of $0.88 in the fourth quarter, that's up $0.08 or 10% compared to the prior year fiscal fourth quarter.

I will now turn the call over to Gregg to review our operating segments in more detail.

Okay.

Thanks, Bob.

Growth continued for our Executive Search segment in the fourth quarter as global fee revenue reached $190.9 million.

Compared year-over-year and measured at constant currency, global Executive Search fee revenue grew $6.5 million or 3.4% in the fourth quarter.

At constant currency, each of our Executive Search regions grew in the fourth quarter.

North America was up 1.7%, Europe was up 7.2%, Asia-Pac was up 4.6% and Latin America was up 2%.

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

Compared to the fourth quarter a year ago at actual exchange rates, our technology practice grew 17%, our industrial practice grew 7%, our financial services practice grew 6%, our life sciences and health care practice was up 1% and our consumers' goods practice was down 11%.

The total number of dedicated Executive Search consultants worldwide at the end of the fourth quarter was 565, which was up 24 year-over-year and up 13 sequentially.

Annualized fee revenue production per consultant in the fourth quarter was $1.37 million.

And the number of new search assignments opened worldwide in the fourth quarter was 1,717, which was up approximately 8% year-over-year.

Adjusted EBITDA for our Executive Search in the fourth quarter was $49.7 million, up $1 million or 2% year-over-year.

The consolidated adjusted EBITDA margin for Executive Search in the fourth quarter of fiscal '19 was 26% compared to 25.5% in the fourth quarter of fiscal '18.

For all of fiscal '19, Executive Search achieved a record high $775 million of fee revenue, which was up 11.4% year-over-year, measured at constant currency, with strong growth in every region.

All of our Executive Search specialty practices grew in fiscal '19, led by technology and financial services, which were up 23% and 14%, respectively.

Additionally, adjusted EBITDA for Executive Search in fiscal '19 was $193.8 million, which was up $34.5 million or 21.7%.

The adjusted EBITDA margin in fiscal '19 for Executive Search was 25% compared to 22.5% for fiscal '18.

Now turning to Advisory, where in the fourth quarter, fee revenue measured year-over-year at constant currency grew 4.8% to $207.1 million.

Growth was driven by strength in both the Europe and Asia-Pacific regions, which were up at constant currency by 9% and 10%, respectively.

As previously mentioned, new business awards for Advisory were steady in the fourth quarter, up approximately 2% year-over-year measured at constant currency.

In the fourth quarter, adjusted EBITDA for Advisory was $38.9 million with an 18.8% margin, both essentially flat year-over-year.

For the full year of fiscal '19, advisory fee revenue grew to $821 million, which was up $60.8 million or 8% year-over-year measured at constant currency.

Adjusted EBITDA for Advisory for fiscal '19 was $151 million, which was up $7.5 million or 5.2% year-over-year.

The adjusted EBITDA margin in fiscal '19 for Advisory was 18.4% compared to 18.3% in fiscal '18.

Finally, turning to RPO and Professional Search, where growth in the fourth quarter continued at a high double-digit pace.

In the fourth quarter, RPO and Professional Search generated a record high $92.8 million of fee revenue, which was up 25.3% year-over-year at constant currency.

All geographic regions grew at a double-digit pace in the fourth quarter, with North America up 28%, Europe up 21% and Asia-Pacific up 22%.

As previously mentioned, in the fourth quarter, RPO and Professional Search was awarded another $84 million of global new business consisting of $50 million of longer-term recruitment outsourcing contracts and $34 million of shorter-term professional search assignments.

Earnings and profitability were also up sharply for RPO and Professional Search in the fourth quarter.

EBITDA grew to $15.6 million, up $3.1 million or 25% year-over-year and EBITDA margin improved to 16.9%.

For the full year of fiscal '19, RPO and Professional Search fee revenue grew to $330 million, which was up $65.7 million or 24% measured at constant currency.

Similarly, EBITDA for RPO and Professional Search grew to $54.4 million, a year-over-year improvement of $11.8 million or nearly 28%.

EBITDA margin for all fiscal '19 for RPO and Professional Search was 16.5% compared to 15.6% for fiscal '18.

I'll now turn the call back over to Bob to discuss our outlook for the first quarter of fiscal '20.

Great.

Thanks, Gregg.

As we exited fiscal '19 and we're entering fiscal '20, our monthly new business trends have been choppy as global economic issues and geopolitical concerns have escalated.

Globally, for Executive Search, new business awards in April were up nearly 5% year-over-year, but up only approximately 1% year-over-year in May.

If monthly new business trends continue, we expect year-over-year growth in Executive Search new business awards to remain essentially flat in June and July.

For Advisory, new business in the first quarter is typically down sequentially from the fourth quarter.

Similar to Executive Search, Advisory had a good month in new business in April, up nearly 5% year-over-year, but May was soft or down approximately 7%.

For Professional Search new business measured year-over-year for May was up approximately 4% at constant currency.

For RPO, both business under contract and the pipeline of potential new business opportunities remained strong, and we expect accelerated growth to continue in the first quarter.

Considering these factors and assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady, we expect our consolidated fee revenue in the first quarter of fiscal '20 to range from $466 million to $486 million.

And we expect our consolidated diluted earnings per share to range from $0.73 to $0.81.

So with that, Gary, anything you want to add before we go to questions?

I would just -- I'd reemphasize that for any CEO, for any Board, talent without strategy is helpless, strategy without talent is hopeless.

I mean it really does come down to those 2 elements and how you synchronize strategy and talent to drive superior performance.

And I think that this is the company that we're building.

We have to continue to move our firm towards a more solutions and industry orientation, which we're going to do.

But I think the opportunity is truly ours for the taking.

As we continue to extend the brand and the partnership with the PGA Tour, I think it's going to pay off for us in telling our story and as we continue to broaden our solution.

So I think with that, we'll turn it over to the operator.

We'd love to have your questions.

(Operator Instructions) Our first question is from Tobey Sommer at SunTrust.

I was wondering if you could talk to us about what you're hearing from clients across your businesses, frankly, given the more choppy and kind of mixed economic data and outlook now for rate cuts.

I think it's -- 2 earning calls ago, we laid out what we thought the economic climate would be, and I think we've turned out to be more right than wrong.

They are -- clearly, I think U.S. GDP growth is going to be substantially less this quarter than last quarter.

Clearly, the trade skirmish has impacted the business in China and it's also impacted our industrial search business in the United States.

That's not coincidental.

There's tremendous decoupling of supply chains in China.

And so I would describe the environment as sluggish, as evidenced by central banks around the world debating on whether they cut rates, which undoubtedly they will towards the end of this calendar year, which should be the right thing to do.

And that's what we're seeing.

And I think that's pretty good generalization.

Yes.

Tobey, this is Bob.

The only other thing I would add to that is that as we were preparing for board meeting last week and this call today, we talked to a lot of folks in the field and the level of business interaction with our clients remain high.

People are just taking longer to agree and sign an engagement with us, which I think we're seeing -- we're not the only one seeing it, I think other firms are experiencing the same phenomena.

How do you approach your internal headcount growth across the businesses in this environment?

It looks like Advisory up year-over-year after a few quarters of being down and now -- and search up, I think, close to mid-single digits.

So how do you think about that and manage that going forward?

We are going to continue to promote from within, and we will have a whole slew of promotions that will happen this quarter that we're currently in.

So we'll continue to do that.

Secondly, we are very aggressively looking for account leaders.

That could be from within the company or from outside.

So we'll continue to aggressively recruit there.

Three is people that have organizational consulting strategy capabilities, we're very aggressive in the market recruiting.

We are obviously always interested in fee earners.

We're going to continue to do that.

In the Professional Search area, we have a high focus on technical skills.

Recruiters that are recruiting in the technology area, the digital area, so we're going all out there.

So those would be kind of the frontline.

And what you would -- I think what you're going to see is that below that, we will moderate the headcount growth.

Okay.

And I'll ask one more question and get back in the queue.

Could you talk about how you're seeing the maturation of the company's ability to grow its product sales and those elements of your business, licenses, et cetera, related to the IP at a faster rate than the company as a whole?

Yes, we've made 2 adjustments that I think is going to get at that.

The one is that there is a piece of the IP that deals with engagement.

And we have entered into -- on March 6 actually, so a few months ago, we entered into a partnership with Qualtrics SAP kind of joint go-to-market and using their technology on that engagement business.

Since we've done that, our win rate has gone up dramatically.

And so we saw some leakage in the year on that part of the business.

So we teamed up with a real technology player to scale that business.

And then secondly is on the assessment side.

We're making some changes there to be able to scale that with multi-thousand employee companies.

We've got to increase our abilities there.

So those are the 2 things within the product business.

And obviously continuing to incorporate the entire IP.

So compensation, development, assessment as an integrated licensing offering.

Next question is from Kevin McVeigh at Crédit Suisse.

Gary or Bob, you talked about kind of, I think, about 20% of the revenue in the key account program.

How does the margins kind of sit with those folks as opposed to the core business overall?

Well, the margins, we think, are better, because you don't have the customer acquisition cost.

And what you'll find is that many of those clients -- well, first of all, almost all of them use all lines of business.

Okay?

So they're truly integrated clients where we're having a real impact on the company.

So that's number one.

Secondly, many of them would involve either some sort of RPO or project-based work that over time will have very, very good margins and you don't have the selling cost.

So we think that when you look at any world-class professional services organization, what you're going to find is 35% to 40% of the portfolio is proactively determined.

So in other words, loyal enduring clients of scale where you're putting tens of people, a multidisciplinary team against the client from all lines of business.

And what it really does, it provides a more stable house over time, but it also shows to the organization what the vision looks like actualized.

So we are very happy with where we are with the Marquee Accounts.

We've got to -- again, we've got to do more.

So you've got that representing about 20% of the portfolio.

This last year, it grew 19% constant currency, but company for the year grew 12%.

So it beat the portfolio.

There is a fair amounting of outsourcing in those clients.

What we're doing right now is now we're rolling that out to another 200 clients that we're calling regional accounts.

And that's obviously not a one quarter exercise, and that's why we're aggressively in the market or promoting from within account leaders.

And then, Gary or Bob, I wanted a few thoughts around kind of the current environment.

Does it feel like we're going into another recession here, given the uncertainty, or just any thoughts around that?

And then given the uncertainty, can you frame out a little bit of the guidance in terms of how we should think about it geographically and then across kind of search versus Hay in Futurestep?

Yes.

Let me take -- first of all, we're not predictors.

That would be very dangerous.

We only guide...

No predict, listen, I can barely do my job, Gary.

I'm not asking you to predict.

Just more of, I guess, tonality.

Yes.

This is not my first rodeo.

So I -- there's been numerous times over the course of my career here.

I think of a couple head-and-shoulder fakes.

There was one around Brexit.

There was one around the presidential election.

There was one around Greek debt crisis in '11.

And so the real question is this, you're facing a cliff or just a head-and-shoulder fake.

I do believe that banks are going to be much more accommodative.

We said that 2 calls ago.

I really do believe it.

And so I -- in the next quarter, we're obviously -- I think our guidance reflects head-and-shoulder.

I think some of our operational decisions, we're being more conservative on headcount below the fee earner, below the consultant.

We obviously want to play it a little bit safer.

But I would also say one other thing, and that is the company today is substantially different than -- I'd even go back to the last crisis, which was severe, deep, really bad.

The company at that point, revenue fell almost 50%.

We've done a lot of modeling.

And if that deep kind of recession happened today, you'd find that the top line would probably go down 28%, 30%.

So substantially different, because we have a product business, we have a consulting business, we have an RPO business that has more scale.

So I would say that, number one.

And secondly, I don't think even if you were going to take a doomsday, you would pencil in that kind of 50% decline to begin with.

Remember, at the trough, 10 years ago, this company went down to $100 million in revenue a quarter.

We just came off a quarter of almost $500 million.

So this is a different card today, no question about it.

In terms of the guidance for the quarter, our -- and I'll let Bob talk about the big picture.

But our guidance assumes that we're going to see China search down, that we're going to see some softening in the U.K. and that we're going to see RPO continuing to have like a really, really good quarter.

Yes.

I would just maybe elaborate, Kevin, a little further.

When you think about the issues out in the -- the macro issues out in the world today with the trade wars and Brexit and so on, as we looked at the guidance, obviously we had the month of May under our belt.

And we're really feeling a bit more of the pinches in those geographies where the issues manifest themselves.

So to Gary's point, China, the guidance reflects some downward pressure there, U.K., a little bit in Germany and so on.

So it's the places where you would expect there to be the downward pressures, where we've provided for those in our guidance.

That's super helpful.

Just a quick recap.

It sounds like the guidance is a bit of a headway, Gary, but operationally may be a little bit more -- not necessarily recession, but little bit more than a head fake in terms of the way you're starting to manage the business?

Yes, absolutely.

You just have to be -- you've got to have eyes wide open, right, because none of us have a crystal ball.

And so we're going to go after the strategic areas where I said.

For sure, they grow the top line, we're going to be much more conservative below that.

And next question is from George Tong at Goldman Sachs.

On a constant currency basis, Advisory revenue growth decelerated a bit to 5% in fiscal 4Q from 6% in fiscal 3Q.

Can you discuss that there were any unusual or onetime items contributing to this slowdown and factors that could drive a re-acceleration in the coming quarters?

Well, were you talking sequentially, George?

Year-over-year growth.

Yes.

In fourth quarter of last year, we did have some big pops in the product business.

So it's a little bit of a tough comp.

We had a number of assessment types of product sales and engagements a year ago.

So it definitely was a tough comparable.

But in terms of the go-forward, I would say that the partnership that I talked about earlier with SAP is one lever that we have to pull.

The second is getting our assessment platforms build a handle, tens of thousands of employees at a time.

I think the third is we've made a strategic push in that Advisory business towards bigger, more impactful deals.

And with that, some of the smaller clients we've purposefully jettisoned playing the long game that you want to create real scaled relationships, I think you'd probably see that too playing in the last 3-or-so quarters.

Yes.

And George, this is Bob.

We had a one particular client engagement that was centered around a merger transaction for the -- our business that had a very large fee.

And the other thing I would add is we also were still selling perpetual licenses to our IP, which are onetime hits to revenue versus where we're going now with the sort of Software as a Service model where you get the revenue over time.

So those are additional items that have impacted.

Got it.

That's helpful.

In the Executive Search business, fee revenue per consultant this quarter was $1.37 million, which declined 3.5% year-over-year.

Can you elaborate on why consultant productivity fell in the quarter?

Yes, George, I can do that.

So if you look at the year-over-year headcount, it's up 24.

13 of that 24 came during the fourth quarter.

And so as people come onboard, it takes a little bit of time for them to ramp up to be productive.

And so by those folks coming in so late in the year, it weighed a little bit on the productivity per partner.

It's really just timing bringing those folks onboard.

The next question will come from Mark Marcon at Baird.

Just wondering if you could talk a little bit about the RPO and perm placement or professional placement business.

Obviously, you're doing extremely well there.

Of the new business that you ended up signing up during this quarter, how much was coming from brand new accounts that have never had an RPO versus wins relative to competitors?

And how are you thinking about what inning we're in the game as it relates to RPO?

Yes.

Mark, it's Bob.

So we did $84 million in total new business for RPOPS.

We did $50 million for RPO.

$44 million of that was new clients and $6 million of it was either renewals or a lot of times, they will expand business in an existing client so that the combination of those 2 was $6 million.

So the 6 and the $45 million obviously gets you to the $50 million.

Listen, I think, on the RPO side, I think it's still early innings.

It's an area that we have a much differentiated product offering.

I think that business has done a really nice job of taking the intellectual property that we have at the center of the organization and integrating it into their service offering.

They built the technology platform that integrates into essentially any HCM that a client has in place that provides them with the information, data reporting that they wouldn't otherwise have.

So I think it's early innings.

And as we talk to the folks in the business, I think they remain very bullish on the opportunities go-forward.

Of the 44 new clients, like how may of those -- they're new clients to you.

But how many of them have had from RPO before where they might potentially be disengaging somebody else as opposed to they've never had an RPO before?

Yes, I don't know the exact number, but my hunch will be that the majority of them are shifting over from other providers.

Okay.

And then with regards to what you're seeing in, particularly in Europe, I mean, you mentioned that during the last quarter in Executive Search, you're up 7% in constant currency, which is really good considering the environment.

Was there a really dramatic shift as it relates to going from the last quarter and going into April and then May, particularly in the U.K. and Germany?

Yes.

We've just seen the pace.

The real -- the pace of new business has moderated, and it's reflective of obviously what you read.

Okay.

And then with regards to Advisory, can you talk a little bit about the different areas in terms of what the trends were there, because it does sound like you're seeing different trends between organizational strategy versus assessment versus leadership development.

So I was wondering if you get a little more granular.

What's the most encouraging?

What's the area that you need to work on the absolute most?

Well, I certainly feel good about what we're doing in the consulting area.

So we've got a number of proposals around the world around org strategy.

So I'm feeling good about what we're doing there.

So we did see in the quarter a nice pickup in org strategy.

So M&A, post-merger integration kind of transformation engagements, we're definitely seeing that.

So that happened in the quarter.

For the year, there was definitely leadership development was the best grower, didn't do as well in the fourth quarter.

But for the year, it was probably 12% or 13% constant currency.

We have 1,000 people doing leadership development every day.

So that was certainly nice to see.

We're very aggressive in the market, trying to bring in consultants in the North America.

I think we're subscale.

We've had success doing that, and we're going to continue to do that for sure.

Mark, this is Bob.

I think the -- Gary was talking about a lot of proposals out there and what -- the way that the business is now going to market is through our -- and we have our 5 core solutions, obviously, but they're weaving them together into an integrated solution that deals with real business outcome, whether it's M&A, D&I, digital workforce.

The thing that companies are wrestling with today, we're able to pull our core solutions together into an integrated solution that's meaningful and helps solve whatever the company's particular business issue is.

Great.

And then within North American Executive Search, I mean, you went from 11.2% growth in the third quarter to 1.5% growth in the fourth quarter against an easier comp.

We've got 22% comp coming up here in the first quarter.

Are you expecting North American Executive Search to be flat or potentially even down in the first quarter?

Certainly flat.

I would say it's going to be flat.

Industrial -- again, it's not coincidental.

I mean it's linked to decoupling of supply chain.

So I -- clearly, industrial is a big part of our business, and I'm not expecting the growth there until this thing gets sorted out.

Okay.

Perfect.

Sure.

And then with regards to the tax rate that you're expecting for this coming year, what should we think about from that perspective?

Yes.

Mark, I'll probably pencil in later on 25% to 27%, midpoint 26%.

They're still wrestling with some of the legislation.

There's new regs coming out, new interpretations coming out constantly.

So as we think about our plan for next year, we're already around 26% plus or minus range.

Okay.

Great.

And then lastly, just capital allocation.

Given your macro comments, how should we think about deployment of capital?

I would continue to think about it how we've been doing it in a balanced approach.

And so we are -- we did -- we repurchased about 1.5% of shares this last year and had a dividend.

We're continuing to look at M&A opportunities.

So I would think it's going to be the same kind of game plan.

Obviously, it's going to be market dependent.

And next question will come from Tim McHugh with William Blair.

Just maybe one more question on Advisory.

I think you talked about Asia and I believe it was Europe being high single-digit growth.

So the implication in the U.S., I would guess, is probably pretty flattish this last quarter.

But I guess, just what was the growth rate for Advisory in the U.S.?

And is there any different dynamics, I guess, happening there?

Why you're seeing just better growth outside the U.S. and how do you change that dynamic, I guess?

Tim, it's Bob.

I think you're right.

The North American Advisory was pretty flat.

And it really goes back to what Gary had mentioned earlier in terms of just being undersized.

We have been very, very aggressively recruiting into all areas in the Advisory practice and it's been successful.

We've brought on a number of new folks, whether it's in the org strategy area, rewards and benefits and so on.

Maybe there's just a data point.

Obviously, it's not a trend.

But we were very happy with the May new business that we saw in North America on the Advisory side.

Particularly consultant.

Correct.

Yes.

Okay.

Okay.

And then RPO, I know that obviously the near-term financials look good.

I guess, how do we think about overall new business?

I know 2018 was a particularly strong new business period, but -- and then 2019, it's much higher than 2017, but much below -- far below 2018, I guess, right?

So recognizing it takes time for some of -- to convert some of these clients into revenue, I guess, trying to think about the continuation of growth a couple of quarters out from here as we work through the pipeline of stuff you've already outlined.

A meaningful ramp again in new bookings?

Well, it's hard to -- because transactions or client relationship has come about and they vary in size.

If you go back to '18, we had one particular win that year that was north of $60 million over 5 years, right?

So that obviously has a huge impact on the new business in FY '18.

I would -- as I think about that business, I would expect the growth to continue to be high double digits that we've seen over the past 3, 4, 5 years.

Yes.

I see nothing to back off RPO and Professional Search.

We're now got to focus in Professional Search around technology and skilled positions.

I wouldn't -- I don't see a need to back off that at all.

And next question is a follow-up from Tobey Sommer at SunTrust.

I was hoping you could elaborate a little bit on your posture for the balance sheet in capital deployment.

You're now at a pretty substantial net cash position.

It wasn't too many years ago that people were clamoring, saying that, that wasn't particularly efficient.

How do you think about it now, particularly given the economic juncture we're at?

Well, I've always thought you save in summer time and invest in winter time.

And investing is not just returning capital to shareholders.

So we've married our best moves during head-and-shoulder times or worse times, and I think that's how you run a business.

Now if time goes along here and we're not able to find an acquisition that makes sense for us, we have to do something with the capital.

I mean I think it's really that simple.

So we right now are postured around kind of a balanced approach.

We're going to continue that.

And obviously, that could change for sure, because you cannot have hundreds of millions of dollars on cash on your balance sheet that is not being deployed.

So we're going to be very agile.

And the great news is that we've repositioned this company, and so the business mix today is pretty sturdy.

You've got $250 million, $260 million product business that we don't think is very cyclical.

It produces incredible profits.

We think we've got an RPO business and Professional Search that look really good with substantial backlog and pipeline and different quality than 10 years ago.

Arguably, the consulting business is not as cyclical as the search business.

And the search business is even more balanced geographically.

So I think you've got a completely different company today.

And we're coming from a position of strength.

And I love times like this, because you can actually make moves.

And so I'm kind of excited.

So we're about a decade after the Whitehead Mann acquisition, which might be sort of that winter you were describing.

If this head-and-shoulders, as was described, can that actually create opportunities for you perhaps?

Yes.

It could.

It absolutely could for sure.

So I kind of love the environment we're in personally.

It's -- when the sky is blue, it's kind of boring.

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

Okay.

Listen, to our colleagues that are listening, just a great year for us, nice quarter.

I thank our investors for listening to the story and hopefully focusing on the long term.

And thank you for all your time, and we'll talk to you next time.

Bye-bye.

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