Korn Ferry (KFY) 2020 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Korn Ferry Second Quarter Fiscal Year 2020 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 our host, Mr. Gary Burnison, let me first read a cautionary statement to the investors.

Certain statements made on the call today, such as those relating to the 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 SEC, including the company's annual report for fiscal year 2019.

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

Additional information concerning these measures, including reconciliation to the most direct 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 will turn the call over to Mr. Burnison.

Please go ahead, Mr. Burnison.

Okay, Tammy.

Good afternoon, everybody, and season's greetings.

Thank you for joining us.

Clearly, this has been an eventful year for Korn Ferry.

November 14, about a month ago, we celebrated our 50th anniversary, and it really capped an unprecedented moment in our history as the preeminent global consulting firm.

Fee revenue in the quarter was up 1% at constant currency.

We had an adjusted EBITDA margin of almost 16%.

And in the quarter, we continued to have a long-term balanced approach to capital deployment.

We repurchased about $50 million of stock during the quarter in addition to our normal quarterly dividend.

On November 1, we completed the acquisitions of Miller Heiman, Strategy Execution and AchieveForum.

And historically, we've only focused on a 10% subset of the $300 billion market for learning and development.

With these acquisitions, we've added professional development, up skilled capabilities that, combined with our current offerings and leadership development, that will leverage our digital platform, tapping a much bigger opportunity in learning development outsourcing.

And the companies that have joined us now, they train more than 210,000 people a year.

As I think about this calendar year and the past few years, the investments that we've made in our business and operations, including folding the firm under one brand with one unified team to handle all of our clients' needs.

So it's really set the foundation to accelerate our growth in the years ahead.

And the foundation for us and the foundation of our go-forward strategy is around our IP.

Arguably, we have the most comprehensive organizational and people databases in the world.

And we have rewards data on more than 20 million professionals, more than 20,000 companies.

We've conducted almost 70 million assessments.

We have organizational benchmark data on 12,000 companies.

We have 3,900 success profiles, 30,000 job titles.

We've got rich IP.

And certainly, last but not least, every business hour, we put somebody in a job every 3 minutes.

And so building on this IP and the investments that we've made, our growth levers going forward are really going to be anchored around 6 key activities.

One is to continue to extend and reposition the Korn Ferry brand, a brand that's synonymous with enabling people and organizations to exceed their potential.

It's about creating opportunity for individuals and for companies.

Secondly, we're going to continue the path that we've very systematically gone down around a pragmatic, programmatic, go-to-market strategy.

We've made investments around account planning and account management talent.

And at the end of the quarter, end of our second quarter, we had more than 300 million Marquee and regional accounts.

And those represented about 30% of the revenue.

And our long-term goal is to have those represent 40%, 45% of the portfolio.

Three, we've got to create scalable, repeatable outcome-based solution sets.

Fourth, we have to monetize this fabulous IP that we have, and that's the whole thinking behind a new business that we're going to be breaking out separately this quarter, the third quarter called KF Digital.

We're going to continue to pursue strategic acquisitions.

And finally, we will be the premier career destination in the consulting world.

And so the integration of these acquisitions is well underway.

We expect the revenue from these acquisitions will add another $120 million to $130 million of revenue.

And combined with what was our legacy products business, initially creates a $400 million Korn Ferry digital business.

We would expect that the adjusted EBITDA margin of the Korn Ferry Digital business after synergies that Bob will talk about will be 27% to 30%.

And as I said, in the current quarter, in our third quarter, we're going to begin breaking out digital in our segment reporting.

And after synergies we expect that this will contribute about $100 million of EBITDA, approximately 1/3 of the company's annualized EBITDA run rate or approximately 19% of the company's annualized run rate net income.

And that's obviously very meaningful because that revenue stream is durable, the IP changes a lot of people's lives.

And it's really about knowledge transfer.

As we look ahead, I think one word sums up the current economic environment and that would be confused.

Part of this results from the sociopolitical climate, whether it's social unrest or inequality, elections, Brexit, trade skirmishes, we can go on and on.

But the important thing is what do you do about it?

And how do you position your organization?

And I think we've been very transparent over the last few quarters.

And we've taken a number of steps that we feel enable us to seize opportunity.

Number one, we introduced this regional account program.

Two, we've continued driving the Marquee account program and the aggressive recruiting of account leaders.

We've talked about how we've been moderating headcount for some time.

We've also shared with you our view around professional search and moving that more towards knowledge-based assignments.

M&A, you know our track record there.

I talked about the recent acquisitions we completed.

And finally, we've laid plans here to monetize the Korn Ferry digital and technology platform that we're building.

And in markets like these, it's great companies that make their best moves.

And we, indeed have a history of seeking opportunity in more turbulent times.

And as such, we've evolved.

We've evolved into a broad-based consulting firm, and our offerings span way more than talent acquisition to organizational advisory services, learning and development, assessment, succession, rewards and benefits and more.

So today, Korn Ferry is a much more diversified, balanced firm.

Based on the year-to-date quarter results -- quarter 2 year-to-date results and the expected top line contribution from the recent learning development acquisitions that we just talked about.

We'd have about almost 2/3 of our revenue outside of our historical Executive Search business.

That includes almost $1 billion in revenue from 4 solution areas: Org.

Strategy, Assessment & Succession, learning development and Rewards & Benefits.

So I believe that this diversification strategy is absolutely taking hold.

And as we enter another new year, we're going to continue our strategic commitment to build the preeminent global organizational consultancy, helping our clients synchronize strategy, operations and their talent to drive superior performance.

That's what it's all about for us.

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

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

Great.

Thanks, Gary, and good afternoon, everyone.

Financial results for the second quarter of fiscal '20 continue to highlight the strength of our business model and the impact that the diverse mix of products and solutions that we have really contributes to the growing durability of our revenue base.

As Gary indicated, we're operating in a confused economic environment driven by a whole host of factors, which really accentuates the importance of our diversification strategy.

Our consolidated fee revenue in the second quarter was $492.4 million, which was down less than 1% year-over-year at actual currency and up about 1% measured at constant currency.

From a solution perspective, at constant currency, RPO and Pro Search continue to accelerate with fee revenue growth of 20%, while our advisory segment was down 1% and Exec Search was down 3%.

We continue to diligently manage our cost base, which resulted in adjusted EBITDA margin -- I'm sorry, adjusted EBITDA of approximately $78 million and an adjusted EBITDA margin of 15.9%.

Turning to new business trends globally.

New business in the second quarter for all of Korn Ferry was up about 11% over last year's second quarter.

Demand for RPO and Professional Search services continues to be strong.

Total new business awards of approximately $150 million in the quarter, consisting of $32 million of new Professional Search assignments and $118 million of longer-term RPO contracts.

Now of the $118 million of RPO contracts, approximately $49 million are with new clients, or what we call, new logos, and approximately $69 million of extensions and renewals with current clients.

Second quarter RPO awards were broad-based geographically, with strong growth in the U.S., the U.K. and China.

At constant currency, our advisory new business was up about 1%, with particular strength in North America, which was up 5% year-over-year.

And our Exec Search new business was down about 5% year-over-year.

At the end of the second quarter, total cash and marketable securities were $609 million, that's up about $86 million compared to the second quarter of fiscal '19.

Excluding amounts reserved for deferred comp arrangements and for accrued bonuses, our investable cash balance at the end of the second quarter was about $346 million, that's up about $102 million year-over-year.

We also had outstanding debt at the end of the second quarter of about $273 million.

It should be noted that the second quarter ending cash balance and outstanding debt balance, both include an incremental $50 million drawn on our revolver to finance portion of the recent acquisitions that Gary spoke about.

In addition to our recent acquisition investments and consistent with our philosophy to maintain a balanced approach to capital allocation in FY '20 through the second quarter and including activity to date for the third quarter, we have now repurchased, in open market transactions, about 1.74 million shares using total cash of approximately $66 million.

Currently, we have about $184 million remaining on our authorization for share repurchases.

And last, on December 4, the Board declared a $0.10 per share dividend payable on January 15, 2020.

Finally, adjusted diluted earnings per share in the second quarter were $0.81, down approximately $0.04 compared to the adjusted fully diluted earnings per share in the second quarter of fiscal '19, and that's mainly driven by a higher effective tax rate in this year's second fiscal quarter, which is about 26.8% compared to 23.8% in the second quarter of fiscal '19.

I'm now going to turn the call over to Gregg, who will review our operating segments in a little bit more detail.

Okay.

Thanks, Bob.

Growth for RPO and Professional Search continued at a high double-digit pace in the second quarter of fiscal '20.

In the second quarter, RPO and Professional Search generated $94.8 million of fee revenue, which was up 20% year-over-year, measured at constant currency.

All geographic regions grew in the second quarter.

As Bob previously mentioned, in the second quarter, RPO and Professional Search new business was strong, the second highest quarter ever.

Earnings and profitability for RPO and Professional Search also grew in the second quarter.

EBITDA was $16.1 million, up $2.9 million or 22% year-over-year, and EBITDA margin improved year-over-year to 17%.

Now turning to Advisory.

In the second quarter, global Advisory fee revenue was $209.8 million, which was down 1% year-over-year measured at constant currency.

In North America and Europe, advisory fee revenue grew modestly year-over-year at constant currency but was down in both Asia Pacific and Latin America.

In the second quarter, EBITDA for Advisory was $36.9 million, which was with a 17.6% margin.

Finally, for Executive Search, global fee revenue in the second quarter of fiscal '20 was $187.8 million, which compared to year-over-year and measured at constant currency, was down approximately 3%.

The total number of dedicated Executive Search consultants worldwide at the end of the second quarter was 585, up 29 year-over-year and up 16 sequentially.

Annualized fee revenue production per consultant in the second quarter was $1.3 million and the number of new search assignments opened worldwide in the second quarter was 1,719, which was down approximately 2% year-over-year.

EBITDA for Executive Search in the second quarter was $44 million, with an EBITDA margin of 23.4%.

Now I'm going to turn the call back over to Bob to discuss the outlook for the third quarter of fiscal '20.

Great.

Thanks, Gregg.

As Gary talked about, starting in fiscal '20 Q3, we're going to be modifying our segment reporting, and we'll be breaking what we call Advisory today into 2 separate reporting segments, KF Consulting and KF Digital.

The new KF Digital segment will include our legacy products, financial results as well as the financial results of our recently acquired companies, Miller Heiman Group, AchieveForum and Strategy Execution.

Now over the past 18 months, we've invested into our digital business to digitize and harmonize the structure of our IP content and data and we are building a technology platform for the efficient delivery of these assets directly to an end consumer or indirectly through a consulting engagement.

Now these investments, when combined with the investments made in the recent acquisitions, it really provided us with the opportunity to step back and relook at the Advisory business and split it into our 2 new reporting segments.

Further, as we recently announced, we implemented a restructuring plan to rationalize the company's cost structure to realize the efficiencies and operational improvement that these investments have enabled us to, or positioned us to realize.

Now the plan will impact the whole of our existing Advisory reporting segment, and it includes the elimination of redundant positions and the consolidation of office space.

As we previously announced, the costs associated with these actions are estimated to range from $20 million to $26 million, primarily paid in cash, and we expect to recognize these charges beginning in Q3 of FY '20 and expect to conclude the actions early in Q1 of FY '21, with approximately $18 million to $22 million of the charges recognized in Q3 of FY '20.

The annual cost savings in KF Digital associated with these actions is estimated to be $25 million to $30 million.

As Gary indicated earlier, at the conclusion of the plan, the new KF Digital segment is expected to have a run rate adjusted EBITDA margin of 27% to 30% and a run rate operating margin of 23% to 26%.

Now from an overall Korn Ferry perspective, the acquisitions and the totality of the restructuring actions are expected to contribute $35 million to $40 million of incremental annual EBITDA, which translates to about $22 million to $25 million of incremental annual net income and about $0.40 to $0.45 of incremental annual EPS.

Now globally, in consolidation, our backlog of undelivered work entering the fiscal third quarter, just typically a seasonally slower quarter for us, is pretty solid.

For the month of October, Korn Ferry consolidated new business was up 10% at constant currency.

However, in November, new business for the whole of Korn Ferry was down about 5% in constant currency.

Now considering these factors, assuming worldwide economic conditions, financial markets, foreign exchange rates stay as they are, we expect our consolidated fee revenue in the third quarter of fiscal '20 to range from $490 million to $510 million.

Now of that amount, we expect about $30 million to be coming from the recent acquisitions.

Additionally, we expect our consolidated diluted earnings per share adjusted to exclude all the restructuring, integration and acquisition charges to range from $0.70 to $0.78.

And finally, our diluted earnings per share for Q3 of FY '20, measured under U.S. GAAP, are expected to range from $0.35 to $0.52 per share.

That concludes our prepared remarks, and we'd be glad to answer any questions you have.

(Operator Instructions) Our first question is from Kevin McVeigh, Crédit Suisse.

Gary.

Given the digital initiatives, I wonder if you can give us a sense of how that impacts the core business.

And I guess, what I mean is, a lot of strategies today lever kind of the digital strategy to kind of reinvigorate or kind of -- not reinvigorate, but enhance kind of the core revenue stream of the business, in this case, the Search business.

Any sense of the growth prospects for that business?

And I guess, I mean, longer term, obviously, independent of kind of where we are, given some of the macro uncertainty.

Well, when you look at the -- the trouble with any consulting business is a question of scale.

And you -- it's hard to scale people.

And what we are doing here is creating a foundation where we can scale IP.

And for any company, for any CEO, we would say that organizational performance is based on 5 things: leadership, strategy, purpose, accountability and capability.

The people equation and the organizational equation is absolutely paramount to a CEO's success.

And so we've got IP that can help companies identify and assess the right kind of people.

We have IP they can use to design their organization, we have IP that can be used for learning and development, and we have IP that can be used for figuring out how to compensate a workforce.

And so as I said in my remarks, I really do believe that it's arguably the most comprehensive organizational and people database in the world.

And so the question for us is how can we change more people's lives?

How can we create greater impact?

How can we do knowledge transfer?

Because not every company wants armies of consultants around.

So we've got IP that we think we can use for knowledge transfer to help the organization and its people exceed their potential.

So I look at it, from that lens and from the lens of scale.

And initially, we're going to start out here with a $400 million business that will throw off initially, almost $100 million of EBITDA, and that business is more durable in many, many respects.

The -- how it impacts the search business because I fundamentally believe that, that is a very precious business that we have.

And I talk a lot about IP, but the fact that we put somebody in a job every 3 minutes is powerful.

And people return our calls.

And so if we can give our company more reasons to dialogue with clients throughout the year, I think you're going to create a much more powerful organization.

And I think it will benefit the search part of -- search part of the business.

But when you look at the market opportunity for us, it's arguably $200 billion, $300 billion.

And the Executive Search market is actually rather small.

I don't think it's any more than $5 billion to $8 billion.

It's very powerful, but it's not, by any stretch of the imagination, the big component of the market opportunity for us.

And so we've seen a demonstrated track record of consultants throughout the organization, referring engagements across solutions.

So for example, in this last quarter, when we look at the consulting business that we have today, 22% of it came from search [projects], and I could go on and on.

So I think we have a track record of delivering quality services and solutions that our client-facing colleagues actually take advantage of.

And Kevin, this is Bob.

I would just add one thing to what Gary just said.

The other thing where I think search -- Exec Search business will benefit and be differentiated is that the intellectual property that Gary discussed, the data that we have that sits at the center of the organization gets fed into each of our solution areas, including Exec Search.

And so to the extent that what we have is unique and different, Exec Search community has the ability to take -- integrate that into their offering and go-to-market in a differentiated way versus our competitors.

Our next question is from Mark Macron (sic) [Marcon] from Baird.

First, on -- when we take a look at the RPO and Professional Search, you're obviously doing tremendously well there.

It seems to us like you're growing faster than the market.

Can you talk a little bit about some of the key drivers that you're seeing there?

How much of the growth would you attribute to the market relative to just your out-execution relative to others?

Yes, I think we're out-executing.

I would say, and then Bob can add, I would -- I say that it's -- number one, the One Korn Ferry approach has worked this last quarter.

It varies by quarter.

But when you look at the referrals from, say, Executive Search, just take that lens for a second, into RPO, it was 35%, into Professional Search, it was 50%.

So number one, that is absolutely working.

But I think the biggest differentiator is what Bob talked about, which is the IP.

And I think that's where we've done a good job of integrating the IP holistically through the organization.

And so I would absolutely say, IP, I think we are then taking a one firm approach.

Then the quality of the work that we're doing, it's obviously phenomenal.

Because you just don't -- this kind of growth we're putting up here, it's -- it is stellar, I mean, there's just no other way to describe it.

Yes.

Listen, Mark.

I would echo what Gary just said.

If you think about our -- again, the IP at the center of the organization.

I grew up in a public accounting environment, which had lines of business; audit, tax, consulting.

IP-rich, but the IP for tax was unique to tax, IP for audit was unique to audit, so on.

Ours is now -- ours is sort of ubiquitous across the whole of the organization.

So everything that sits in that center fueled by box, if you will, permeates all of our lines of business.

And if you think about our RPO offering, they can bring into the offering successful profile, they can bring into the offering interview questions, they can bring assessment protocol into their offering, they can bring in pay data into their offering.

Other folks can't do that.

And so I think that's why we're winning.

Next question is from the line of George Tong with Goldman Sachs.

The Advisory business is splitting into KF Consulting and KF Digital, how would you distinguish the near and intermediate-term growth prospects of both of those businesses separately?

And what initiatives do you have to accelerate the growth of KF Consulting?

The KF Consulting business.

The real opportunity there is in the United States.

And let me just provide a little bit of context.

The -- just -- we've been in business 50 years, and the Search business in North America, call it, roughly $400 million a year.

The consulting business that we have, and it's been a lot less than 50 years and more like 5 is already $200 million.

But if you just think that you've got this Search business that's $400 million and you think about the market opportunity there.

I then note the enormous market opportunity in consulting, around organizational strategy, around change management, around M&A.

That is multiples.

And so I look at that and say, number one, that is very tangible, very practical, and not that the entire world isn't important because it is but in the last -- not the last acquisition but the acquisition we did 3 years ago with the Hay Group, 80% of the assets were outside the U.S. So that's really why I'm highlighting the United States because it is a big market and the business right now, there is a couple of hundred million dollars annually.

What we can do to accelerate that market is to, number one, be relentless around these Marquee and regional accounts, be -- put account teams against them, be proactive in selecting them and having a long game in mind.

Secondly, we have to bring in account leaders.

Third, we have to aggressively recruit and promote consultants into that organization.

And I think we also need to move the business over time to bigger engagements because where you're going is one thing, but you also have to look at where you've come from.

And where we came from in that business through inorganic and organic means, a lot of it has been anchored around individual transactions, smaller ticket sizes around assessment and succession, leadership development.

And so we have to move that business towards bigger, more impactful engagement, sizable engagements that have to be anchored around business outcomes, which, one, we're having quite a bit of success is M&A.

Another one is culture change.

So those are the things we have to do on the consulting business.

On the digital business, you also have to recognize where we came from.

And we came from books and placemats, and we've got to go analog to digital.

So we're putting in the business, Bob can tell you the exact amount, it's probably around $5 million or $6 million a quarter, into the underlying platform.

And I think we have to continue to do that because that will be the differentiator.

Our IP is world-class, we know what separates great from good.

The other part of that is in the learning development outsourcing, I think we can create a business much like we did with RPO, around LDO, learning development outsourcing.

And finally, I'd say the other thing is that, with that digital business, a lot of the work that we've done up to this point is focused on the top 10% or so of a company.

That's not always true, but it's more true than not.

Well, the reality is there are many, many, many others in an organization and I think that, through these last 3 acquisitions we've done, we've got a real focus on scale.

And how can we create platforms where companies can license our IP to touch thousands of people's lives.

Our next question is from the line of Marc Riddick with Sidoti.

Wanted to touch on sort of now with the -- and we're certainly looking forward to making this part of the reporting and having access to that information going forward as you go through this part of the journey, but I wanted to sort of discuss where this puts you on your thoughts on M&A going forward?

Does this -- and the prioritization that you currently have when you look at the overall company?

And does this sort of put you on the sidelines for a little while?

Or how should we think about that going forward?

Well, we're never on the sideline.

But the question is, do we actually throw the ball?

And so we're very much always in the market.

And so what I can't ask -- I can't answer is whether we're actually going to pull the trigger on something?

Because that depends on a whole host.

But clearly, you've got an enormous market opportunity, very fragmented market.

I don't think there's one consultancy that's solely focused on an organization, its strategy and its people and how you synchronize that.

So when you look out, you have to believe that the Korn Ferry is going to continue to not only grow organically but has to make meaningful investments and acquisitions.

So we're always on the field.

We're never on the sidelines.

I think this integration here will be done rather quickly.

We've already taken a number of steps, even though it just closed November 1. So I'm not concerned about our capability to digest something.

So we're always on the field.

But we're also very, very pragmatic and systematic about how we go about this.

We're disciplined, we're price disciplined, we're culture disciplined and we'll continue to be that way.

And we're also mindful that the capital has an implied cost.

And we have to be beating that cost of capital.

Yes, Mark, this is Bob.

So if you think about -- if you go back to when we did the Hay Group transaction in December of '15.

That one at the time, we were about $1 billion there, $0.5 billion.

So it was a kind of a big bite.

And we digested that over, say, 18 months.

This transaction, obviously, we're close to $2 billion and it's a $120 million to $130 million of revenue.

We fully expect to be integrated, sort of beginning of next fiscal year.

So much quicker than what we saw at the Hay Group.

And we have a question coming from the line of Mark Marcon from Baird.

All right.

Can you talk a little bit more about Miller Heiman and what it's -- what it specifically will be adding?

When we think about the $120 million to $130 million in revenue, what the margin profile is?

And if we could disaggregate what the contribution there is going to be relative to some of the restructuring efforts that you're going to put in place in terms of what that contribution would be?

Just a lot of -- a lot to unpack there.

Let me hopefully provide a little bit of context, and Bob, you can maybe talk about the margins and the like.

The -- we would expect, based on the current environment as we see it today, that we would have a $400 million Digital -- Korn Ferry Digital business.

When you break that down, about $100 million of it would be around rewards, where companies license our data.

$120 million would be around Assessment & Succession.

$60 million would be around Org.

Strategy, they are licensing our IP to set up an organization, spans and layers, job profiles, all of that.

The final piece is $120 million around learning development.

And that is principally anchored around the professional and below level.

And so the Miller Heiman piece comes in to that $120 million.

And I'm not going to break out the exact size of that yet because it's just too soon, but it's certainly more than 50% of the $120 million.

What it does for us is that in any kind of environment, a CEO will always be looking at their -- the way that they're selling.

And what Miller Heiman gives for us is rich IP and great people around how a company can drive growth.

And in turbulent times, it's actually even more important than when the wind's behind your back.

So it gives us the ability to do sales performance.

It also fits very, very nicely with our business because we place many hundreds, if not thousands, of sales professionals.

And so there is -- there's synergy there with parts of our talent acquisition business.

So that's how I would set the context around the $400 million.

We would expect after we do the synergies that, that would essentially be -- in today's environment, run rate EBITDA of $100 million, something like that.

Yes.

And Mark, I would also add.

I would encourage you not to look at it as sort of individual pieces.

I'll use an analogy I used when we did the Hay Group transaction, when we integrate these businesses, we do it as quickly as possible.

And it's like creating a milkshake once you hit blend, you can't pull it apart, right?

And I'll tell you, at 12:01 a.m.

November 1, Gary hit blend and we're working as hard as we can to not only to integrate the back office, but to integrate the go-to-market activities.

And we're folding these businesses into the One Korn Ferry model.

So we don't even think about them as individual businesses today any longer.

So I think if you step back, what we've bought, probably mid-single-digit EBITDA margins.

And when we get through everything that we're doing, as Gary indicated, 27% to 30% EBITDA margins on the sort of the digital milkshake, if you will.

That's great.

And what about the KF Consulting, the traditional consulting?

How should we think about that?

Yes.

I think some of the actions we're taking, Mark, impact that business.

And again, when we get through all of this, you should be thinking about EBITDA margins in the say, the 12% to 15% range for that business.

Next question is from Marc Riddick with Sidoti.

I just want to ask a follow-up as to -- I didn't know it's been a fairly short period of time.

But I was wondering if there was any feedback that you've received from some of the Marquee clients that you deal with and what their receptivity was to where you're -- from the transaction and some of the opportunity set that you see as far as the feedback you've received from them as well.

Yes.

We already secured $1.5 million deal, actually a win, together.

And again, as Bob said, it's hard to -- if you focused on one, again, the other 2 companies that we bought have tremendous capability and tremendous people, particularly around professional development, broad-based professional development.

Miller Heiman, it's a brand that is very, very, very well known.

And so we have gotten positive feedback, not only actually from clients but from many consultants in our own organization that have gone through Miller Heiman training.

And in fact, we're going to use it like we do with all of our IP on ourselves.

So the feedback has been good, and we have absolutely incorporated their teams into the Marquee and regional account program.

The next question is from Mark Macron (sic) [Marcon] from Baird.

Gary, we've been through multiple cycles together, you've got tremendous perspective in terms of talking to global leaders all around the globe.

From your perspective and where you're sitting, and obviously there's lots of different opinions out there.

But from where you're sitting, do you think things from a macro perspective feel the same, better or worse today than they did, say, 3 months ago?

I think the ADP report on the job market was more right than wrong.

And I think there is more cautiousness now on the part of CEOs than there was 3 months ago.

And I'm -- whether you put that on the December 12 election in Britain, whether you put it on all the other things that are happening, but I would say there's certainly more caution today than there was 3 months ago.

It appears there are no further questions in the queue right now, Mr. Burnison.

Okay.

Thank you.

For any company, successful strategy implementation is about execution, and that's about getting the people and the organizational and the cultural aspects right, and that's what we do.

We're more than talent acquisition, more than leadership development, more than rewards.

We focus on making change happen, and we're going to make change happen in 2020.

So have a great holiday season.

And we'll talk to you, if not sooner, in the new calendar year.

Thank you very much.

Bye-bye.

Ladies and gentlemen, this conference call will be available for replay for 1 week starting today at 7:30 p.m.

Eastern Time, running through December 12 ending at midnight.

You may access the AT&T Executive playback service by dialing (866) 207-1041 and entering the access code 9543885.

International participants may dial (402) 970-0847.

Additionally, the replay will be available for playback at the company's website, www.kornferry.com in the Investor Relations section.

That does conclude your conference for today.

You may now disconnect.

Thanks, Tammy.

Thank you very much.