Korn Ferry at Goldman Sachs Communacopia & Technology Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: George Tong - Goldman Sachs - Analyst : Great. So let's start with strategy. Korn Ferry has diversified its business over the years well beyond executive search, and the business now includes consulting, digital solutions, interim search. Why is it an advantage to have all of these businesses within the portfolio?

Question: George Tong - Goldman Sachs - Analyst : Yeah. Makes sense. And it also certainly makes the business more macro resilient.

Question: George Tong - Goldman Sachs - Analyst : Right. And how would you describe the cyclicality of your various business lines? Which are more cyclical, which are lease cyclical, which are in between?

Question: George Tong - Goldman Sachs - Analyst : Makes sense. And I guess speaking of cyclicality, what do your more procyclical businesses tell you about where we are in the cycle?

Question: George Tong - Goldman Sachs - Analyst : Now, Mathias, you're responsible for leading the firm's digital business. This segment deploys and sells IP related to products around HR, technology and various functional cross-area lines of businesses. So can you talk a little bit more about the digital business, its strategy, and its various unique assets?

Question: George Tong - Goldman Sachs - Analyst : Your longer-term growth target for the digital business is 10% to 15%. Right now, you're in the mid-single-digit range. When do you think the growth can get to your targeted growth range? And what are the catalysts? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 10, 2024 / 10:05PM, KFY.N - Korn Ferry at Goldman Sachs Communacopia & Technology Conference

Question: George Tong - Goldman Sachs - Analyst : Right. And sort of related to that, could you talk a little bit more about how clients are consuming KF Digital today? And how could that evolve in the future?

Question: George Tong - Goldman Sachs - Analyst : And Mathias, maybe talk a little bit about what you're doing in terms of the platform to make it easier, not just how they consume or to consume at all?

Question: George Tong - Goldman Sachs - Analyst : You mentioned the subscription revenue mix is around 40% within digital today. Where do you think that can go? And what are some of the products that can get you there?

Question: George Tong - Goldman Sachs - Analyst : Got it. Let's take a step back and talk about broader revenue trends. In the fiscal first quarter, you saw some additional signs of stabilization in some of your more pro-cyclical businesses, albeit off of depressed levels, so no positive inflection yet. Can you talk a little bit more about some of these trends in Exec Search and.

Question: George Tong - Goldman Sachs - Analyst : Right. Within Executive Search, are there certain geographies that are growing or performing stronger than others? And are there any reasons why some of the recent trends may deviate from historical performance?

Question: George Tong - Goldman Sachs - Analyst : Got it. You're targeting consulting revenue growth in the 10% to 15% range, very similar to digital. What are some of the catalysts that can jump-start consulting growth from what currently is around the low single-digit range.

Question: George Tong - Goldman Sachs - Analyst : Yeah. Maybe building on that, right, because that also feeds into some of the synergies between the lines of business.

Question: George Tong - Goldman Sachs - Analyst : Right. Right. Now given both your digital and consulting businesses that have the 10% to 15% medium-term target, which of the two do you think will get there first and why? And Bob, what's your favorite.

Question: George Tong - Goldman Sachs - Analyst : Right. And I know digital was put together through a combination of multiple M&A pieces with different tech stacks. What are some of the things that you might have to do to integrate and normalize all of the tech stack together?

Question: George Tong - Goldman Sachs - Analyst : Got it. Korn Ferry is also in the RPO business. Can you briefly talk about what the RPO business is for those that might not be familiar.

Question: George Tong - Goldman Sachs - Analyst : Got it. That's helpful. Typically, the RPO business is going to be driven by new business wins that can be lumpy and then ongoing hiring volumes or base volumes from existing clients. Where are you seeing most, I guess, sensitivity to cyclical trends? Is it the base performance? Or is it the new client wins?

Question: George Tong - Goldman Sachs - Analyst : Got it. Interim search is a relatively new business for Korn Ferry. Revenues are declining double digits. Can you talk about how Korn Ferry's interim business is different or better than other temp staffers out there?

Question: George Tong - Goldman Sachs - Analyst : If you sort of dive into the interim search business, are there certain pockets either end markets or geographies that are experiencing more pressure than others?

Question: George Tong - Goldman Sachs - Analyst : Right. One of the key advantages of having a diversified business model is cross-selling. Can you talk about what your rate of cross line of referral activity is right now and where it can go to over time? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 10, 2024 / 10:05PM, KFY.N - Korn Ferry at Goldman Sachs Communacopia & Technology Conference

Question: George Tong - Goldman Sachs - Analyst : Got you. Most of your cross-selling typically happens among your larger customers, your marquee and your regional accounts. Can you talk about what revenue mix your marquee and regional accounts represent? And and how fast those accounts are growing?

Question: George Tong - Goldman Sachs - Analyst : Right. Makes sense. I'm going to pause there for a moment to see if there are any questions from the audience. Okay. Let's turn to margins. So your guidance points to roughly 250 bps of year-over-year margin expansion in fiscal 2Q. What's driving that significant amount of margin expansion? And how sustainable is it?

Question: George Tong - Goldman Sachs - Analyst : Some of your newer business ventures like interim search carry lower margin profiles how much of a revenue benefit would you need to see from these businesses to get comfortable with the margin profile?

Question: George Tong - Goldman Sachs - Analyst : Right. In the fiscal quarter 2Q, your margin guidance, like you said, is 16.5%. What is your longer-term target for EBITDA margins? And how do you bridge that gap?

Question: George Tong - Goldman Sachs - Analyst : Got it. And then lastly, capital allocation. What are your current capital allocation priorities? And if you're looking at M&A, where do you see opportunity?

Question: George Tong - Goldman Sachs - Analyst : Great. Well, Bob, Mathias, thank you so much for the time and the insights.

Question: George Tong - Goldman Sachs - Analyst : Please to meet the management team.